OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (Maio-Outubro 2020)
Vol. 11, nº 1 (May-October 2020) - https://doi.org/10.26619/1647-7251.11.1
ARTICLES
Axel Honneth's normative proposal for the renewal of Human Rights - Paulo Vitorino
Fontes – 1-17
Combating cybercrime as a prerequisite for the development of the digital society -
Olga A. Klymenko, Mykhailo V. Gutsaliuk e Andrii V. Savchenko – 18-29
Verbal communication: an essential factor in imternational trade - Sandra Ribeiro e Maria
João Ferro – 30-40
Myths and realities of the asymmetric relationship: Cuba, the European Union and the
failure of the Common Position (2006-2016) - Rogelio Plácido Sánchez Levis – 41-59
A historical perspective of entrepreneurship in Angola - Renato Pereira – 60-76
The importance of Latin American space in the internationalization of Portuguese SMEs -
André Brás dos Santos e Joaquim Ramos Silva – 77-97
Entrepreneurship and Economic growth: the mediation role of finance - Mohsen
Mohammadi Khyareh – 98-111
NOTES
Maritime piracy in the Gulf of Guinea - Henrique Guedes – 112-119
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 1-17
AXEL HONNETH'S NORMATIVE PROPOSAL FOR THE RENEWAL
OF HUMAN RIGHTS
Paulo Vitorino Fontes
pfontes@uevora.pt
Holder of a Ph.D. in Legal-Political Theory and International Relations and of Master and Bachelor
Degrees in Sociology. He has participated in social intervention projects within the scope of
European programmes. Author and participant in several projects, he has had coordination roles
at Novo Dia - Association for Social Inclusion (IPSS). He was Regional Director of the Social
Solidarity Section. He is a researcher at CICP - Centre for Research in Political Science at the
University of Évora (Portugal). His main research interests are Political Science and Political
Philosophy.
Abstract
This paper examines some aspects of Axel Honneth’s normative theory, focusing on his theory
of recognition, that can contribute to the renewal of human rights. To this end, it will start by
making a few philosophical considerations about the justification and content of human rights,
exploring the dialectic on the unity and diversity of human rights, in order to liaise the struggle
for human rights and the struggle for recognition. It intends to move human rights away from
the current inherent to Kantian philosophical thought, weakened by the decentralization of
the European culture and conducted by 20th century postmodern reflections and by the
critique of its categorical imperative as a pure duty of submission. It also examines the way
to open space for a renewal of the discourse so as to enable it to confront delimited cultural
and historical challenges. Other critical perspectives are included in this theoretical
association, whether regarding the anti-utilitarian aspect, or the aspect of the gift paradigm,
in order to contribute to the ethical renewal of human rights.
Keywords
Human Rights, Honneth, recognition, gift, ethics
How to cite this article
Fontes, Paulo Vitorino (2020). "Axel Honneth's normative proposal for the renewal of Human
Rights". JANUS.NET e-journal of International Relations, Vol. 11, N.º 1, May-October 2020.
Consulted [online] on the date of the last visit, https://doi.org/10.26619/1647-7251.11.1.1
Article received on July 14, 2019 and accepted for publication on March 30, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
2
AXEL HONNETH'S NORMATIVE PROPOSAL FOR THE RENEWAL
OF HUMAN RIGHTS
1
Paulo Vitorino Fontes
Introduction
Human rights result from the process of the formation of the modern world. Their
configuration is influenced by the general characteristics of the transition to modernity.
As Gregorio Peces-Barba (1989: 268) underlines, human rights are not the abstract result
of a rational reflection on the individual and his dignity, but a response to concrete
problems in which they were undermined or diminished in the absolute State and in the
context of the religious wars that took place in the 16th century.
The first individual, political and procedural rights that appear in history and which form
the core of the declarations of the liberal revolution are not the result of a great rational
reflection, but a response to a concrete situation existing in Europe and in the colonies
of European countries in the 16
th
and 17
th
centuries. Although they were based on general
ideas as they were being conceived, a consensus emerged on the initial catalogue of
human rights. Thus, as Peces-Barba (1989: 269) points out, any attempt to justify or
rationally renew human rights must take into account their historical starting point, which
were dissent and struggle regarding the legal and political situation of the absolute State.
Over the years and struggles, the French Declaration of 1789 and the American
Declarations of Rights provided the occasion for the historical emancipation of the
individual from the social groups to which he had always been subjected: the family, the
clan, the will and the religious orders. As Fábio Konder Comparato (2010: 68) stresses,
it is important to mention that in this respect, the ground had been prepared over two
centuries earlier. On the one hand, the Protestant reformation had decisively emphasized
the importance of individual awareness regarding morals and religion. On the other hand,
the culture of the exceptional personality, of the hero who forges his destiny and the
destiny of his people, had been developed, especially in Italy during the Renaissance.
The evolution of human rights became much more substantive from 1945 onwards with
the emergence of World War II, after massacres and atrocities of all kinds, which started
with the strengthening of state totalitarianism in the 1930s,
humanity has understood, more than at any time in history, the
supreme value of human dignity. Suffering as a matrix for
understanding the world and men, according to the luminous lesson
1
This paper results from the last chapter, revised and updated, of the author's doctoral thesis (Fontes, 2016).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
3
of Greek wisdom, has deepened the historical affirmation of human
rights. (Comparato, 2010: 68-69)
The Universal Declaration approved by the United Nations General Assembly on 10
December 1948 and the International Convention on the Prevention and Punishment of
the Crime of Genocide, approved a day earlier also within the framework of the United
Nations, constitute the inaugural milestones of the new historical period, which is in full
development.
We cannot, therefore, turn away from the challenge that Comparato poses us to find a
foundation that goes beyond state organization in the practice of human rights. For
Comparato (2010: 72), this foundation can only be the "collective ethical conscience, the
conviction, long and widely established in the community, that the dignity of the human
condition requires respect for certain goods or values in any circumstance, even if not
recognized in the state order, or in international normative documents". This collective
ethical awareness expands and deepens throughout history. "The demand for social
conditions capable of enabling the realization of all human beings' capacities is thus
intensified in time, and necessarily translates into the formulation of new human rights"
(Comparato, 2010: 79).
Accordingly, this paper’s challenge is to contribute to the expansion and ethical renewal
of human rights, invoking some authentic assumptions from the political sphere, such as
recognition and gift.
The justification of human rights poses additional difficulties to those who want to defend
the ideals of this discourse. This justification is supported by a metaphysics of the non-
objectification of the human being, in the wake of the Kantian philosophical tradition,
and, although defended by many authors, is weakened in contemporary thought. The
use of Kant’s transcendental categorical imperative constitutes the double problem of
relying on a theistic view of the world to explain the existence of an absolute truth
(Kelsen, [1960] 1998) - which may not find support in contemporary thought and,
simultaneously, resulting in an empty norm, a clear-cut must be (Agamben, 2007: 58-
69).
In addition, the decentralization of knowledge conducted by history and culture shows,
at all times, the partiality and contingency of metaphysical truths. As a consequence,
oppositions to the human rights discourse are common due to its alleged ethnocentrism,
denial of the subject's historicity and clear framing within an extensive history of Western
interventionist political practices. In addition, the long and varied list of human rights
finds wide support in the dignity of the human person, a legal principle whose intelligibility
is conditioned by the realization of the rights it supports.
Nowadays, we face a rapid expansion of the Western way of life to all corners of the
world. Often, under the veil of reason and image from the West, other cultures have been
subjugated by an unequaled global capitalism whose consequences are, in an evident
way, neither rational nor human.
In this context, Seyla Benhabib (2008: 179) stresses that "the legacy of Western
rationalism has been used and abused in the service of institutions and practices that do
not stand the scrutiny by the same reason which they claim to spread ". For the author,
at the same time the planet becomes materially a single world, it is important to
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
4
understand how the claims of universality can be reconciled with the diversity of life
forms. This constitutes a relevant theme for International Relations, the complex dialectic
of universalism and relativism or the unity and diversity of human rights, which will be
examined next.
1. On the unity and diversity of Human Rights
The language of human rights has been the public vocabulary where the most pressing
demands are made, as demonstrated by Michael Ignatieff (2003). The author draws on
his vast experience analysing international affairs to offer us an intense narrative of the
successes, failures and different perspectives of the human rights revolution. Since the
United Nations adopted the Universal Declaration of Human Rights in 1948, this
revolution has brought moral progress to the world through the continued expansion of
rights, and has broken the supremacy of the Nation-State in the handling of international
affairs. Ignatieff (2003) argues that human rights activists have drawn criticism from
Asia, the Islamic world and the Western world for being overly ambitious and unwilling
to accept limits. Therefore, the author argues, one of the main challenges is to re-
establish a balance between the rights of states and those of citizens.
The expansion of human rights, as well as their defence and institutionalization, have
become the indisputable language, although not the reality, of global politics. Benhabib
(2008: 179), concerned with the question of the universality of human rights, defends
the existence of a fundamental moral right inherent to all human beings, "the right to
have rights" that Hannah Arendt ([1951] 1973 : 330) stated for the first time in her work
Origins of Totalitarianism. In Benhabib's reinterpretation (2008: 179), "the right to have
rights" is to be recognized by others and to recognize others as persons worthy of moral
respect and legally guaranteed rights within a human community.
When disagreeing with the philosophical perspective that wants to reduce the content of
human rights to a portion of what is internationally agreed, Benhabib (2008: 184) argues
that it is necessary to develop the justification strategy and the content of human rights
beyond the minimalist concerns, with a view to having a broader conception of human
rights under the "right to have rights". The reconceptualization she proposes goes beyond
Arendt's meaning, according to which the "right to have rights" was seen essentially as
a political right, in the sense of the right to belong to a political community. Benhabib
(2008: 184) proposes "a conception of the right to have rights, understood as the claim
of each individual person to be recognized and to be protected as a legal personality by
the world community". This broadening of the concept beyond the state sphere results
from the gap Benhabib (2008: 184) detects in contemporary discourse on human rights,
which fails to take into account the changes that have taken place with the shifting of
legal norms from an international perspective to a cosmopolitan one.
Benhabib (2008: 184-187) analyses human rights from a discursive and theoretical
perspective, in an attempt to understand the extent to which there are certain minimum
assumptions about human nature and rationality that must underlie any normative
formulation of human rights. For the author, universalism cannot be translated solely
into a legal-political issue. Normative commitments are necessary so that justifying
universalism is interwoven with moral universalism.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
5
For Benhabib, any political justification of human rights based on legal universalism must
resort to justificatory universalism. Only by recognizing the communicative freedom of
the other will the justification procedure be meaningful. However, there are different
philosophical perspectives on the content of recognition. The distinctive feature of
Benhabib's position (2008: 187) is "the interpretation of this communicative freedom in
its relation to the right to have rights". The author departs from Kant’s position and
proposes a discursive-theoretical justification of the principle of law "instead of asking
what each of us could will without self-contradicting to be an universal law, in discourse
ethics we ask: "Which norms and normative institutional agreements could be considered
valid by all those who would be affected by them if they were participants in special moral
argumentations called discourse?" (Benhabib, 2008: 189).
The fundamental difference in the model proposed by Benhabib (2008) in relation to the
various theories centred on the agent, is that it proceeds from "a view of the human
agent as an individual embedded in contexts of communication as well as interaction.
The capacity to formulate goals of action is not prior to the capacity to be able to justify
such goals with reasons to others" (p. 189). Action and communication are inextricably
linked. "I only know myself as an agent because I can anticipate being part of a social
space in which others recognize me as the initiator of certain deeds and the speaker of
certain words" (p. 190).
Here, even without mentioning it, Benhabib's discourse meets Axel Honneth's theory of
recognition, as we will see later, since the conditions for intersubjective recognition will
be able to guarantee the communicative freedom that Benhabib proposes.
For communicative freedom to be exercised, it will be necessary to respect each person's
capacity for action and communication, to be recognized as a member of a human
community in a social space of interaction. For Benhabib (2008: 190), having rights is
a moral claim to be recognized by others as a rights-bearing person
entitled to a legally instituted schedule rights. Others can only
constrain your freedom as a moral being through reasons that
satisfy the conditions of formality, generality, and reciprocity for all.
In addition, the right to have rights implies the acknowledgment of the other's identity,
both "as a generalized as well as a concrete other". If we recognize the other only as a
being who has the right to have rights just because he is like us, then we are denying
his difference, his fundamental individuality. If we do not recognize the other as a being
with the right to have rights due to his marked alterity in relation to us, then we are
denying our common humanity.
For Benhabib (2008: 190-191), recognizing the generalized other requires considering
others, each and every individual, as human beings who have the same rights and duties
that we want to ascribe to ourselves. In this dimension, the individuality and the concrete
identity of the other are abstracted and the moral dignity that we all have in common is
emphasized. The type of relationship established is governed by the rules of formal
equality and reciprocity. Each has the right to expect from others what we can expect
from him. In treating the other according to these norms, I ratify the rights of humanity
in the other and I legitimately hope that the other will do the same with regard to me.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
6
On the other hand, recognizing the concrete other requires regarding each and every one
as human beings with an affective-emotional constitution, a concrete history and a
unique identity. In this dimension, what we have in common is abstracted and we focus
on individuality. The relationship is governed not only by equity and reciprocity, "but it
anticipates experiences of altruism and solidarity" (Benhabib, 2008: 191).
Benhabib (2008) does not intend to describe human nature through the generalized and
the concrete concepts. Above all, they are "phenomenological accounts of human
experience" (p. 191), whose tensions the author does not analyse.
In relation to the generalized other, it assumes a universalist form based on the
egalitarian experiences of modernity, albeit fragile and contestable, which may constitute
practical possibilities that can be extended to all humanity.
Reciprocal recognition of each person as a being who has the right to have rights implies
learning processes, political struggles and social movements. This is the authentic
meaning of universalism for Benhabib (2008: 191):
Universalism does not consists in an essence or human nature which
we are all said to have or to possess, but rather in experiences of
establishing commonality across diversity, conflict, divide and
struggle. Universalism is an aspiration, a moral goal to strive for; it
is not a fact, a description of the way the world is.
Benhabib's justification of human rights (2008: 192) through a discourse-theoretic
account of communicative freedom, which takes place in a dialogical practice, moves
away from naturalistic perspectives and from possessive individualism. She understands
the recognition of the other's right to have rights as an authentic precondition for the
other to be able to contest or accept my first demand.
Her project called "interactive universalism", which is different from other contemporary
positions, previously developed in her work Situating the Self (1992) and later expanded
as "democratic interactions" in Another Cosmopolitanism. Sovereignty, Hospitality, and
Democratic Iterations (2006), characterizes the interaction processes that occur between
the democratic formation of will and opinion on the one hand, and constitutional
principles and international law on the other. The concept aims to analyse the relationship
between unity and the diversity of human rights, as well as the relationship between their
moral nucleus and their legal form.
However, as Benhabib (2008: 196) admits, "the right to have rights seems quite abstract
and formalistic". If human rights are principles that need to be contextualized and
specified in legal norms, then how to formulate this legal content?
The answer given by Benhabib is "to proceed from the right to have rights (...) to the
norms of equal respect and concern and to derive a concrete list of basic human rights
in this fashion. Human rights would then find their place in moral philosophy" (p. 196).
But how can we account for the diversity of the world, its tremendous inequalities? How
can an ethics of discourse that gives us only the minimum conditions for the dialogical
procedure, which claim to be sufficiently tenuous so that they cannot be identified with
any particular view of the world and, on the other hand, sufficiently consistent to guide
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
7
the dialogue with a view to a rational consensus, contribute to the renewal of human
rights?
This Habermas based view needs, in our opinion, the complementarity of Axel Honneth’s
theory of recognition, since the right to have rights implies a struggle for recognition, in
which the acquisition of social recognition is the normative condition of all communicative
action.
In view of these difficulties, by proposing to found a social theory with normative content
in post-metaphysical contemporaneity, especially in the work entitled The struggle for
recognition, Honneth's research gives us the appropriate tools for understanding and
renewing the struggle for human rights.
The next objective is, in a first phase, to use Honneth’s theory of the struggle for
recognition, include the most recent update of Hegel's Law and explore his normative
proposal regarding the conditions of an ethical life. Other critical perspectives will be
included in this reflection, whether regarding the anti-utilitarian aspect or the aspect of
the gift paradigm, in order to contribute to the ethical renewal of human rights.
2. The theory of recognition in the renewal of human rights
The idea of a struggle for recognition as a methodological key for understanding social
conflicts was initially advanced by Hegel during the period called "Jena", as a reference
to his stay in this city and to the theoretical instrument he developed, as a young teacher
of Philosophy, whose internal foundation goes beyond the institutional horizon of his time
(Honneth [1992] 2011: 13). It is from here that Honneth seeks the possibility of founding
a new social theory with normative content, following the line of Horkheimer's previous
contribution to critical theory. In this sense, Honneth ([2000] 2007: 66) intends to
associate his project with the philosophical tradition of “left Hegelianism”, which includes
numerous authors and thinkers like Marx, Adorno and Habermas.
From the reinterpretation of Frankfurt theorists, Honneth proposes the existence of three
assumptions that cross his analysis: (1) the declaration of a universal reason capable of
making social movements intelligible; (2) the discordant performance of this reason as
the cause of a pathology; and (3) an emancipatory goal identified from suffering
(Honneth, 2009: 42).
The first two assumptions are open and, thus, it is not possible to check their empirical
evidence. It is only from the last theoretical assumption that one can offer the theory a
positive content that can be object of experimentation. Accordingly, Honneth proposes
the construction of a social theory with normative content, dependent on the capacity for
pre-theoretical verification of social suffering, capable of informing theoretical thinking of
the relevance of an emancipatory will in society.
However, according to Honneth ([2000] 2007: 65), the Frankfurt School had remained
tied to historical Marxist materialism, associating social suffering with the particular
issues of a class, the proletariat, which was responsible for transforming its suffering into
an emancipatory engine. But when history showed that the proletariat had transformed
its suffering in support of the rise of fascism, the positive tone initially adopted by critical
theory became out of step with society's understanding and transformation.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
8
However, for Honneth, what history shows as inadequate is only the specific positive
content adopted by the theory, which was linked to the exploitation of work and not to
its theoretical foundation, and the possibility of developing a social theory of normative
content remains open, as long as we depart from suffering as revealing an emancipatory
will in society. For this thinker, without any kind of proof that the critical perspective of
the theory is reinforced by a movement in social reality, critical theory can no longer be
followed in contemporary times, since it would not be possible to distinguish it from other
models of social criticism, due to its claim of a superior sociological method or due to its
philosophical justification procedures. For Honneth ([2000] 2007: 66), it is only through
its attempt, which has not yet been forsaken, to provide criticism with an objective
foundation in pre-theoretical praxis that it can be said that critical theory is unique and
alive.
From this exercise, Honneth criticises Habermas' theory of communicative action,
precisely because he does not find support in the clear diagnosis of social suffering. He
argues that if communication is removed from the theory of language and understood as
an intersubjective process, through which human identity develops, this suffering can be
perceived in the deficient recognition of some identities and, thus, the criticism would
find in this recognition its lost normative support (Honneth, [2000] 2007: 75). It then
appears that the Hegelian philosophical project is rescued from a struggle for recognition.
In Honneth's theory ([1992] 2011), we notice an effort to conceptualize the three spheres
of recognition: Love, Law and Social Esteem, initially identified by Hegel. These spheres
of interaction, through the cumulative acquisition of self-confidence, self-respect and
self-esteem, create not only the social conditions for individuals to reach a positive
attitude towards themselves, but also originate the autonomous individual.
The sphere of love constitutes the primary affective relationship of mutual recognition
that structures the individual since birth, and which is dependent on a fragile balance
between autonomy and attachment. According to Honneth ([1992] 2011: 159-179), the
symbiotically nurtured bond, which is formed by an initially mutually desired delimitation
between the mother and child, creates individual self-confidence, which will be the
fundamental basis for autonomous participation in public life. From the normative
perspective of the generalized other that teaches us to recognize others as holders of
rights, we are allowed to understand ourselves as legal entities. The sphere of law
develops in a historical process, its development potential is verified in the generalization
and materialization of the legal recognition relationships. In order to achieve an
uninterrupted self-relationship, human subjects also always need, in addition to the
experience of affective dedication and legal recognition, a social appreciation that allows
them to relate positively to their concrete properties and capabilities. This is within the
sphere of social esteem, a third relationship of reciprocal recognition based on the
assumption of symmetrical valuing, according to which individuals consider each other in
the light of values that make the other's capabilities and properties important for common
experience. The symmetrical relationship does not mean a reciprocal appreciation in
equal measure, but the challenge that any subject has the opportunity to experience
himself as being valuable to society through his capacities and properties. Only in this
way, according to Honneth's reasoning, under the notion of solidarity, will social relations
be able to access a horizon where individual competition for social valuing may be free
from experiences of disrespect.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
9
In the succession of the three forms of recognition, the degree of a person's positive
relationship with himself progressively increases. With each level of mutual
consideration, the individual's subjective autonomy also grows. Likewise, parallel
experiences of social disrespect can be attributed to the corresponding forms of mutual
recognition.
For Honneth, the practice of deviant behaviours would not only result in social
disapproval, but in preventing the individual from having a positive recognition of himself
in his action. This opens the possibility of transforming the collective ethics that allow the
realization of the Self. In this sense, the struggle for social recognition of the subject's
particularities would be the constant transformation engine of the ethical framework of a
society, in order to include forms of individuality that in a given circumstance are subject
to precarious recognition.
In order to rebuild the foundation of a social theory with normative content, along the
lines of the project previously conducted by Horkheimer for critical theory, Honneth
recovered the Hegelian philosophical project of the struggle for recognition. Although at
first he was limited to looking for his bases in the thinking of the young Hegel, in more
recent works (Honneth, 1999, [2001] 2010 and 2014), the author tried to link that
intersubjective struggle to the notion of freedom formulated by the older Hegel, as
opposed to the atomistic views of Kant and Fichte.
Honneth states that Hegel's theory of justice shares with these authors the centrality of
the idea of equal individual freedom for all. However, his theory differs from the others
in conceiving freedom as something that goes beyond a simple subjective right or a
simple moral autonomy. For Hegel, adopting any of these views of the concept of
freedom, in an isolated way, would lead to social pathologies resulting from the violation
of the “absolute spirit” (Honneth, [2001] 2010: 25). In this Hegelian thesis, although of
a metaphysical and historically situated nature, Honneth considers that there is a critical
nucleus that must be transported to our days.
Honneth's (1999) proposal to update Hegel's Philosophy of Law does not intend to
rehabilitate neither the methodical conditions of Logic, nor Hegel’s basic conception of
the State. But stripped of these elements, Hegel's Philosophy of Law can be conceived
as "a project of a normative theory of those spheres of reciprocal recognition whose
maintenance is constitutive of modern societies" (Honneth, 1999: 19). To address such
a challenge, Honneth presents the remaining elements that allow this updating: the
concept of "objective spirit" and the notion of "ethics".
The first concept (objective spirit) seems to me to include the thesis
that all social reality has a rational structure, whose rejection
through false or insufficient conceptions must lead, even where they
are applied in a practical way, to negative consequences in social
life. (Honneth, 1999, p. 19)
With regard to the concept of ethics, Honneth considers that it contains the thesis that
in social reality "spheres of action can be found in which the inclinations and moral norms,
interests and values are fused in the form of institutionalized interactions" (Honneth ,
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
10
1999: 19). Therefore, these spheres, and not the State, would deserve a normative
characterization through the concept of ethics.
Based on these principles, Honneth (1999: 26) updates Hegel's theory of law in three
stages. In the first, he presents a theory of justice based on the Hegelian concept of "free
will" which, having been conceptualized in opposition to atomist perspectives, determines
the full scope of what we must call "right". The difficulty of this fundamental intuition is
related to Hegel’s thesis that "the will has itself as an object". Honneth interprets this
idea based on Hegel’s definition of love: "Being yourself in the other". With this
interpretation, the focus shifts to the existence of social and institutional conditions, seen
as fundamental, as they should allow the subjects’ communicative relationships. For
Honneth, those spheres, expressed in institutions and systems of practices that are
irreplaceable to enable self-determination socially, are the authentic bearers of rights.
Thus, Philosophy of Law is understood as the theory of the social conditions that enable
the realization of “free will”, which goes towards a normative theory of social justice.
From this perspective, Hegel's theory of law is divided into three divisions. The first two
are "Abstract law" and "Morality", where Hegel addresses the incomplete conditions for
the achievement of free will, in the form it takes, respectively, modern rights or capacity
for moral self-determination. The third part, “Ethics”, deals with complete conditions,
distinguishing three spheres of communicative action: the family, civil society and the
State. From then on, the theory of justice is articulated with the diagnosis of the time,
constituting the second stage of Honneth's updating proposal.
Honneth (1999) compares Hegel's claim with Habermas's argument in Facticity and
Validity. For Habermas, “the legitimacy of the legal-state order comes from the guarantee
of the conditions of democratic formation of the will”, while in Hegel “it goes back to
individual self-realization to have from its conditions the task of a modern legal order”
(Honneth, 1999: 43).
Hegel gives a vast description of the concepts contrary to freedom, as a trend of the
time. What hinders his task is: “To highlight, in the development of his theory of justice,
the necessary function that legal freedom and moral freedom assume in relation to the
conditions of communicative freedom, which are evident in the ethics concept” (Honneth,
1999: 45).
In the first part of Hegel's work on abstract law, he argues that calling for it is only a
possibility, something about the whole set of circumstances. Using this faculty would
depend on quasi-characterological factors and result in suffering: “The person who
articulates all his needs and purposes in the categories of formal law is unable to
participate in social life and, therefore, will suffer in indeterminacy” (Honneth, 1999: 50).
But, on the other hand, one can recognize the value of the formal right in relation to
individual self-realization, since the subject, seeing himself as a holder of rights and by
showing the limits imposed by social relationships, has the opportunity to withdraw
behind ethics.
In the second part of the book, which corresponds to morality, Honneth reconstructs
Hegel's argument to show the relationship between the limits the subject stumbles over
when conceiving unilaterally, in a moral way, the realization of his freedom and the
reasons that foster the passage to the sphere of ethics. Hegel's criticism is directed
against Kant’s categorical imperative, as its application results in disorientation and a
feeling of emptiness. Kant believed that his categorical imperative would apply wherever
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
11
there was a moral conflict. However, according to Hegel, the formality of the imperative
led to the abstraction of the social environment, where concepts and moral points of view
are already institutionalized, and so, the imperative loses its founding function.
So that Hegel's argument is not understood as moral relativism, Honneth (1999: 53)
argues that “the concept of ethics is a theoretical-moral argument in a narrow sense”
and that the proposal to understand social reality as an incarnation of free will represents
an epistemological and social ontology argument. When we do not consider the ethics or
the sufficient rationality of social institutions, which become second nature, the subject
is abandoned to interior emptiness and poverty of action. Therefore, the path to ethics
must be experienced as a liberation, not only for abandoning incomplete conceptions,
but also for its therapeutic effect on a pathology in the world of life that causes suffering.
Thus, it should be understood as an “achievement of affirmative freedom” (p. 53). This
way, Hegel's Philosophy of Law presents a phenomenology of the configurations of
freedom, with an equivalent theory of justice, where free conscience is linked to the
diagnosis of the time, and these elements converge in the ethics doctrine.
Honneth's final action is to update the ethics doctrine in a normative theory of modernity.
To this end, he established self-realization and recognition as fundamental conditions.
"Only in an action whose execution is characterized by the fulfilment of certain moral
norms can a subject guarantee to be recognized by others, because this recognition is
determined precisely by the moral competences, which are established through the
corresponding action norms" (Honneth, 1999: 53).
Thus, the normative content of ethics is an articulation of the forms of intersubjective
action that can guarantee recognition due to their moral quality. In this sense, the family,
civil society and the State are constituted as social spheres with fields of practice, which
can guarantee individual freedom in its modern configurations that combine recognition,
creation and self-realization.
The renewed theory of the struggle for recognition appears as a model to understand
social conflicts as ethical claims that contribute to the expansion of the subjectivation
possibilities and alter the ethical framework of the whole. Thus, the transgression points
to the ethical insufficiency of the collective, not of the transgressing individual. The focus
of law intervention is inverted, ceasing to be centred on the individual, on the need to
adapt him to social conventions, to focus on society and on its need to recognize and
include the most diverse modes of existence, guaranteeing their physical survival and
valuing their uniqueness.
After presenting the struggle for recognition, which, in order not to fail, needs ethics with
normative content, this article examines other critical contributions and completes the
moment of struggle with that of gift, as both are poles of a recognition relationship. Only
in this way the conditions for a renewal of human rights are met, both at collective and
individual levels, since human rights are, at the same time, the legitimizing basis of law
and the moral foundation that inspires our lives.
According to Flávia Piovesan (2010), the complementarity between the different
dimensions of human rights already has doctrinal and legal recognition. However, it is
not clear to what extent they are based on the Kantian or to the natural law philosophical
theoretical framework to which human rights usually refer. The ideal of not objectifying
human beings seems to support the dimension of civil liberties and social rights. Since
the human being should not be treated as an object by his fellow men, then his body
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
12
must enjoy immunity. This includes renouncing direct action on him and guaranteeing all
his needs, to avoid that, abandoned, he is forced to surrender to the will of the other.
However, with regard to political rights and the right to difference, the Kantian ideal does
not seem to provide an adequate basis, since it does not seem possible to base political
participation and the recognition of the right to difference on the non-objectification of
human beings.
In the same way that the categorical imperative of acting so that his behaviour can, out
of his own will, become universal law. In addition to not providing material consistence
and admitting any behaviours and imposing a duty void of meaning, it seems to be,
ultimately, opposite to the recognition of diversity. From it, it is not possible to derive a
need for recognition of the difference of the other, but on the other hand, it can be
demanded that the other resembles, in his behaviour, the Self.
Accordingly, the Kantian abstract formalism proves to be insufficient to support the
theme of human rights and does not seem to be able to substantiate the new themes
that have been incorporated in the struggle for human rights, which Western rationality
was unable to include in its historical development.
Whereas Western modernity offers us essential values, such as freedom and authenticity,
according to Charles Taylor ([1992] 2009) it also brought us profound problems:
egocentric individualism, the primacy of instrumental reason and the loss of freedom.
Since individualism is shaped by the ideal of authenticity, Taylor seeks the deeper
meaning of this ideal, with the aim of reinvigorating the ethics of authenticity. What is
new and important in Taylor's thinking ([1992] 2009) is the idea of a more complete and
original individuation that has always been part of a community of meaning. Each
individual is unique and must live according to his uniqueness and originality. More than
observing the differences between individuals, it is important to realize that these
differences imply the duty to live according to this originality. Thus, in contrast to the
standardization and generalization of an instrumental perspective in relation to self and
others, it is the articulation of my originality with others that defines us as people. Thus,
authenticity, as a moral ideal, is essentially dialogical and intersubjective, since
authenticity is the unique expression of the self, more in the form than in content, built
on inner, intrapsychic dialogue with others who are significant to us. From here, we build
and reconstruct our identity in a continuous recognition relationship. Authenticity is only
achieved through intersubjective recognition. Duly articulated and recognized
authenticity enables the most complete form of human fulfilment.
Thus, the recognition theory as an alternative paradigm seems appropriate. Recognition
is a multidimensional phenomenon - intersubjective, social and political - in which one
cannot speak of full recognition until the conditions for the full fulfilment of individuality
are guaranteed, until the subject's autonomy in his historical singularity is ensured, and
the freedom of the body, moral autonomy and the dignity of his individuality are
safeguarded.
Rather than imposing the particular subjectivity patterns of globally dominant cultures,
human rights become a means of defending the forms of subjectivation that are present
within local cultures, but which are poorly recognised. Thus, instead of enclosing the
content of human rights in foreign standards and pretensions, their borders are opened
to different historical and cultural situations.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
13
One of Silvério da Rocha-Cunha's (2015: 169) central ideas is "the need for a New World
Culture, where everyone gives and receives without fear, especially without that border
fear that delimits territories and legitimizes the split between friend and enemy". A
cultural liberation that implies, according to the author, a previous political-cultural
liberation. Only through the creation of conditions that allow dialogue can the major
socio-economic and ecological problems of our era be solved.
"These problems have reached a dimension that risks reaching a point of no return"
(Rocha-Cunha, 2015: 176). The relentless logic of economic growth, which exploits the
other, degrades social ties, continues to grow at the expense of sustaining the planet and
future generations. For him, the economic issue needs questions of an ethical nature, in
order to establish a global economic theory based on justice with the peoples of the Earth
and with future generations.
In this sense, Juan Ramón Capella (2005 and 2007), starting from a philosophical-
political reflection around the central problem of the contemporary world: its ecological
and social crisis in the midst of a technological revolution, the real universalization of
economic relations, the new supra-state sovereign powers, the crisis of citizenship and
the assumptions of political intervention; proposes, in the face of a world that abandoned
the "good life" - the object of ethics - the reconstruction of social bonds: the search for
new bonds between people, free bonds, not mediated by the State. To this end, it will be
necessary to relearn solidarity, help and understanding among people and appreciating
their diversity. The objective is to reconstruct the bonds, similar to those that in the past
linked people, stripped of the "metaphysical" character, involuntary and unconscious, but
that allow the common learning of new forms of life and civilization.
Thus, as Rocha-Cunha (2015: 177) stated, "an attitude of positive expectation regarding
the fruitful contributions of other cultures is required. It will then be possible to have a
kind of intercultural reconciliation that will know how to resolve the systemic crises that
overwhelm our planet".
Due to the imposition of Western standards, colonialism that did not cease to exist within
societies and, to a large extent, in relations between the North and the South, so,
enormous obstacles and difficulties arise in the construction of a dialogue between
cultures. As Rocha-Cunha (2015: 178) refers, these are problems that are linked to the
logic of social systems themselves, as these tend towards progressive simplification and
continuous internal adjustment with a view to their maintenance. So they look for simple
certainties, instead of looking for the other, the different, pluralism and human
complexity. On the other hand, the supposed universalism of the West and its lack of
respect for other cultures, mainly from the African and South American continents, has
turned vast dialogues into an empty list of commitments.
Boaventura de Sousa Santos (2003), concerned with establishing fruitful intercultural
dialogues, considers that all cultures are incomplete and problematic in their conception
of human dignity. Incompleteness stems from the existence of a plurality of cultures and
this is understood better from the outside, from the perspective of another culture. If
each culture were as complete as it intends, there would be only one culture. Thus,
raising the awareness of cultural incompleteness to the maximum proves to be one of
the most important tasks for the construction of a multicultural conception of human
rights.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
14
According to Francesco Fistetti (2007: 297), the pursuit of purely utilitarian interests or
power on the part of dominant countries has fuelled the negative aspects of globalization,
to the extent that these effects backfired against the same countries. The logic of the
market without rules ends up leading, sooner or later, to violence, war and barbarism.
The lesson that Marcel Mauss ([1924] 1988) proposes is to temper private interest with
general interest: securing peace above the idea of a common wealth and the idea of a
common world. We could thus say that any people, any culture or nation intends to give
something specifically its own to the large family of peoples, nations and cultures, and
wishes to be recognized and rewarded for that contribution: it intends to be part of the
giving-receiving-giving back cycle, but in a broader sense, not only in economic terms
but also symbolic and cultural. Like the producer who has the feeling of giving something
that is not reducible to his working time, but which is related to the gift of self and his
existence, also the poorest and most excluded peoples and nations should not be
considered mere operators of a supposedly equal exchange, dependent on the "Homo
ecunomicus" model, since the exchange is unequal from the beginning, since the material
inequality of the subjects (Fistetti, 2007: 298).
We must understand others and otherness as worthy of respect, accept difference as
difference and not as indifferent, capable of enriching our humanity and our view of the
world, recognizing them as capable of giving something that we do not have. As Julien
Rémy & Alain Caillé (2007) point out, peoples who give confiscate the moment of
donation, becoming those who give, that is, those who always give wthout receiving
anything in return, not expecting more recognition from those who receive it. Here, the
domination relationship lies in the fundamentalism of a cultural conception based on self-
centred Western rationality which sees the other as a simple reflection of himself.
For Alain Caillé (2010), the theories of justice, in the line of John Rawls, present the
problem of not breaking off with a utilitarian conception of the human subject. As
Amartya Sen shows, they aim at an unattainable ideal and have nothing to say in specific
cases.
On the other hand, Caillé underlines that there is another major theoretical and political
debate in the world that takes place around recognition theories. All subordinate, post-
colonial, cultural, and feminist studies, among others, address the issue of recognition,
albeit from different perspectives. For them, a good society would be one where no one
would remain invisible, unknown or poorly recognized. The problem with these
approaches, in turn, is that they feed on the competition of the victims. They do not
answer the question of who should give recognition to whom; a recognition that cannot
be distributed in the same way as monetary income. And, finally, they leave the question
of the amount to be granted to those seeking recognition undetermined, such as the
ultimate values in the name of which recognition can be granted.
Recognizing a culture means giving it a unique and irreplaceable value within cultures
and civilizations. From this perspective, we can understand Caillé's views about the social
value of people and affirm that the value of a culture can be measured by its ability to
give, both in the gifts actually made and in its potentialities for giving, or ability to give.
And going back to Caillé's question: what will be the evaluation criteria, the potency or
the act of giving? It becomes evident, just as among people with regard to cultures, that
it is not a matter of establishing an axiological hierarchy between higher and lower
cultures, but it is about the phenomenological sense of the gift (das Ergebnis), as
highlighted by Hannah Arendt ([1958] 2007) and Caillé (2008), of the dimension of the
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
15
donation, freedom and spontaneity. The gift has value and values those who give it, as
long as freedom and originality exceed the part of the obligation, and “the dimension of
disinterest, towa
rds others, is more important than the dimension of the personal interest, towards itself.
It is this excess of freedom over the obligation that forms and measures the donor's
value” (Caillé, 2008: 160).
Each culture contains the value of something that comprises human plurality, such as
literature, works of art, symbols, and codes of behaviour, among others. It is in relation
to this constitutive plurality that Arendt ([1958] 2007) invites us not only to adopt an
attitude of astonishment and admiration, but also to recognize that on Earth, which is
our common home, there is a person, a group of people or a people who have a position
in the world that cannot be reproduced or replaced and a world view that only they can
embody. For this reason, Arendt insists that the alliance is the heart of politics conceived
as the space for relationships between peoples and between cultures. She reminds us
that the peace and covenant treaties in Western societies are notions of Roman origin
that made it possible to create a common world, transforming yesterday's enemies into
tomorrow's friends.
In order to conclude this encounter of the struggle with the gift within a theory of
recognition, we draw on the analysis of Paul Ricoeur ([2004] 2010 and 2006). For this
author, the mutuality of the giving relationship, or the exchange of gifts as a process of
symbolic recognition, are placed between the ceremonial and the moral sense. By
denouncing the "unhappy conscience" or the "bad infinity" that an ever-demanding
subject may have, the author "is telling us, in a way, that before demanding recognition,
we should happily grant it. (...) Recognize, before demanding recognition for oneself", as
Gonçalo Marcelo writes (2011: 123). By introducing dissymmetry at the centre of
reciprocity, Ricoeur is both asserting the difference between people and putting the other
before himself. And if recognition is granted to us, we must act with gratitude, recognize
in return. Even if I am not obliged to repay, if I don't, I can break the social bond. Thus,
"Ricoeur proposes an asymmetric, altruistic recognition relationship through which the
other assumes a certain verticality: I must recognize the other in the first place" (Marcelo,
2011: 123). This verticality in the relationship with the other does not make him
inaccessible, since the ceremonial character of recognition allows horizontality in human
interactions.
Thus, by proposing an altruistic subjectivity, Ricoeur is building a pure ethics of
recognition, based on states of peace, on gift practices that constitute a sphere of
meaning and give us a normative supplement as the ideal regulator of our actions.
Final considerations
This text first addressed the justification of human rights, reflecting on themes that
influence International Relations, such as the universality and the diversity of these same
rights, with the contribution of several authors. Emphasis was placed on Benahbib, who
defends this dialectic in terms of the right to have rights, previously stated by Harendt,
in order to expand the achievements of this historic struggle.
Then Honneth's critical theory of recognition was developed by bringing in other theories
by Ricoeur and Caillé, with the aim of contributing to the ethical renewal of human rights.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
16
A second discourse on recognition not limited to the perspective of the struggle or the
consideration of an instrumental objective was then built, which completes itself in the
otherness, through recognition and gift.
After presenting the struggle for recognition, which, in order not to fail, needs ethics with
normative content, we completed the struggle with the gift, as both are poles of a
recognition relationship.
Removing the Kantian categorical imperative that supposes a single rationality, the
western one, human rights were taken to the ethical level, to dialogue, to the otherness,
to the encounter with the other. Thus, recognition and gift are assumed as authentic
assumptions of the political space.
References
Agamben, Giorgio. (2007). Homo sacer I: o poder soberano e a vida nua. Translated by
Henrique Burigo. 2nd ed. Belo Horizonte: UFMG.
Arendt, Hannah. ([1949] 1973). Origens do totalitarismo. Translated by Roberto Raposo.
São Paulo: Companhia das Letras.
Arendt, Hannah. ([1958] 2007). A condição humana. Translated by Roberto Raposo. Rio
de Janeiro: Forense Universitária.
Assembleia Geral das Nações Unidas. ([1948] 1998). Declaração Universal dos Direitos
Humanos. Brasília: UNESCO.
Benhabib, Seyla. (1992). Situating the Self. New York: Routledge.
Benhabib, Seyla. (2006). Another Cosmopolitanism. Sovereignty, Hospitality, and
Democratic Iterations. New York and London: Oxford University Press.
Benhabib, Seyla. (2008), “Otro universalismo: Sobre la unidad y diversidadde los
derechos humanos”. Translated by David Álvarez. ISEGORÍA. Revista de Filosofía Moral
y Política, No 39, July-December, 175-203.
Capella, Juan Ramón. (2005). Los ciudadanos siervos. Madrid: Editorial Trotta.
Capella, Juan Ramón. (2007). Entrada en la barbarie. Madrid: Editorial Trotta.
Caillé, Alain. (2008). “Reconhecimento e Sociologia”. Translated by Maíra Albuquerque.
Revista Brasileira de Ciências Sociais, vol. 23, n. 66, 151-163.
Caillé, Alain. (2010). “Vers une societé de convivialite avancee?” Recontre de Tokyo, 10-
10 Juillet.
Comparato, Fábio Konder. (2010). A afirmação histórica dos Direitos Humanos. São
Paulo: Editora Saraiva.
Fistetti, Francesco. (2007). “Justice sociale, justice globale et obligation de donner”.
Revue du Mauss, no. 30, SECOND semester, pp. 279-300.
Fontes, Paulo. (2016). Autenticidade, reconhecimento e dádiva: para uma renovação dos
Direitos Humanos. Doctoral Thesis in Legal-Political Theory and International Relations.
Évora: Universidade de Évora. Available at: URL:
https://dspace.uevora.pt/rdpc/bitstream/10174/18727/1/Tese.pdf
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.1-17
Axel Honneth’s normative proposal for the renewal of human rights
Paulo Vitorino Fontes
17
Honneth, Axel. ([1992] 2011). Luta por reconhecimento: para uma gramática moral dos
conflitos sociais. Translated by Jorge Telles de Menezes. Lisbon: Edições 70.
Honneth, Axel. (1999). Suffering from indeterminacy. An attempt at reactualization of
Hegel´s philosophy of right. Translated be Jack Ben-Levi. Amsterdam: Spinoza Lectures.
Honneth, Axel. ([2000] 2007). Disrespect: the normative foundations of critical theory.
Translated b John Farrel and Joseph Ganahl. Malden: Polity Press.
Honneth, Axel. ([2001] 2010). The pathologies of individual freedom: Hegel’s social
theory. Translated by Ladislaus Löb. New Jersey: Princeton University.
Honneth, Axel. (2009). Patologias de la Razon. Translated by Griselda Mársico. Madrid:
Katz.
Ignatieff, Michael. (2003). Los derechos humanos como política e idolatría. Barcelona:
Paidós.
Marcelo, Gonçalo. (2011). Paul Ricoeur and the Utopia of Mutual Recognition. Études
Ricoeuriennes / Ricoeur Studies, Vol 2, No 1 (2011), pp. 110-133. Available at:
http://ricoeur.pitt.edu/ojs/index.php/ricoeur/article/view/69/20. Retrieved on
07/08/2014.
Mauss, Marcel. ([1924] 1988). Ensaio sobre a Dádiva. Translated by António Filipe
Marques. Lisbon: Edições 70.
Kelsen, Hans. ([1960] 1998). O problema da justiça. Translated by João Baptista
Machado. 3rd ed. São Paulo: Martins Fontes.
Peces-Barba, Gregorio. (1989). “Sobre el fundamento de los derechos humanos: um
problema de moral y derecho”, in Gregorio Peces-Barba Martínez (eds.), El fundamento
de los derechos humanos. Madrid: Debate, pp. 265-277. Available at:
http://hdl.handle.net/10016/12917. Retrieved on 09/050/2013.
Piovesan, Flávia. (2010). Direitos humanos e o direito constitucional internacional. 11.
ed. São Paulo: Saraiva.
Rémy, Julien & Caillé, Alain. (2007), “Ne vous demandez pas ce que vous pouvez faire
pour l’Afrique”. La Revue du MAUSS permanente, 18 August.
Ricoeur, Paul. ([2004] 2010). A luta pelo reconhecimento e a economia do dom.
Translated by Cláudio Reichert do Nascimento and Noeli Dutra Rossatto. Ethic@ - Revista
Internacional de Filosofia da Moral, v. 9, n. 2, 357-367.
Ricoeur, Paul. (2006). Percurso do reconhecimento. Translated by Nicolás Nyimi
Campanário. São Paulo: Edições Loyola.
Rocha-Cunha, Silvério da. (2015). Crítica da razão simplificadora – escritos sobre poder
e cidadania numa era de compreensão. V. N. Famalicão, Edições Húmus.
Santos, Boaventura Sousa. (2003). Por uma concepção multicultural de direitos
humanos. in B. S. Santos (org.). Reconhecer para libertar. Os caminhos do
cosmopolitismo multicultural. Rio de Janeiro: Civilização Brasileira, pp. 427-461.
Taylor, Charles. ([1992] 2009). A ética da Autenticidade. Translated by Luís Lóia. Lisbon:
Edições 70.
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 18-29
COMBATING CYBERCRIME AS A PREREQUISITE
FOR THE DEVELOPMENT OF THE DIGITAL SOCIETY
Olga A. Klymenko
ms-kl18@ukr.net
Ph.D. in Law. Head of the Department at the Interagency Research Center on Problems of
Combating Organized Crime under the National Security and Defense Council of Ukraine (from
2017 to 2019), Kyiv (Ukraine).
Mykhaylo V. Gutsalyuk
mvgutsalyuk@ukr.net
Ph.D. in Law, Associate Professor. Chief Researcher at the Interagency Research Center on
Problems of Combating Organized Crime under the National Security and Defense Council of
Ukraine, Kyiv (Ukraine).
Andrii V. Savchenko
savchenkoav@ukr.net
Doctor of Law (LLD). Professor of the Criminal Law Department of the National Academy of
Internal Affairs, Kyiv (Ukraine).
.
Abstract
The article deals with the issues of cyber security and cybercrime in the digital society. The
areas for improving international cooperation to ensure the security of the Internet are
proposed.
Digitized society is being implemented around the world at a high rate and offers significant
benefits for the development of both society as a whole and its individual components. At the
same time, a factor that has a negative impact on this development is cybercrime. The article
explores the current state and main trends of cybercrime, including its organized forms.
The legislative and organizational measures are proposed to counter cybercrime, the leading
role of international cooperation is emphasized, including the rapid exchange of electronic
data to detect and investigate cybercrime.
Keywords
Cybercrime, Cyber security, International cooperation, Digital society, Counteraction
How to cite this article
Klymenko, Olga A.; Gutsaliuk, Mykhailo V.; Savchenko, Andrii V. (2020). "Combating
cybercrime as a prerequisite for the development of the digital society". JANUS.NET e-journal
of International Relations, Vol. 11, N.º 1, May-October 2020. Consulted [online] on the date
of the last visit, https://doi.org/10.26619/1647-7251.11.1.2
Article received on November 12, 2019 and accepted for publication on March 26, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
19
COMBATING CYBERCRIME AS A PREREQUISITE
FOR THE DEVELOPMENT OF THE DIGITAL SOCIETY
Olga A. Klymenko
Mykhaylo V. Gutsalyuk
Andrii V. Savchenko
Problem statement
One of the signs of the modern digital society is the rapid development of information
technologies and the spread of the Internet, which are being introduced into all spheres
of life. The first website in history was created in 1991, and today there are more than
1.8 billion websites in the world. If in 2015 the number of Internet users was about 2
billion, then in 2019 they already exceeded 4 billion (Internet live stats, 2019).
The first-ever Digital Europe programme, proposed in June 2018, will invest in five key
digital sectors: high performance computers, artificial intelligence, cybersecurity and
trust, advanced digital skills, and ensuring the wide use and deployment of digital
technologies across the economy and society, in order to strengthen European industrial
technological leadership (EU Budget, 2018).
At the same time, with the development of computer technology, a new form of criminal
activity appeared – cybercrime, which today has mastered the environment of computer
networks and mobile devices. The anonymity of global information networks, the speed
of information transfer makes it possible to use these advantages not only for the
development of the information society, but also for the commission of unlawful acts.
This is also facilitated by the fact that information and communication technologies are
being introduced and are developing much faster than legislators and law enforcement
agencies can react to. Therefore, the sustainable development of a digital society is only
possible if the cybercrime is actively combated, including its organized forms.
Cybercrime, unlike the traditional ones, is characterized by the fact that they are
committed using computers and data networks, including the global Internet. As a result,
such crimes can be transboundary in nature and perpetrated by organized criminal
interstate groups. Another feature is that the evidence of such crimes is contained in
electronic devices (electronic or digital evidence) and has the ability to be quickly
modified or even destroyed.
After the World Health Organization recognized the coronavirus as a pandemic, many
organizations around the world began to introduce remote methods of work in their units,
including organizations such as the US Congress, the Pentagon, NASA. At the same time,
Internet traffic has increased significantly. For example, Webex web conferencing traffic
has grown 22 times! (Free video conferencing: Coronavirus spurs special deals from
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
20
WebEx, Google, others, 2020). In such conditions, the reliability of telecommunications
increases significantly.
The corporate culture will not be the same after coronavirus. Some of the companies will
remain distant after the global epidemic. Firstly, the employees themselves, having felt
the benefits of homework, will not want to return to offices. And secondly, business
owners, having measured the KPI of employees and savings on rental premises and
utilities, can leave only the most necessary employees in the office.
Cybercrime and cybersecurity measures
If cybercrime in the last century were relatively rare events and investigated within
individual states, at the beginning of XXI century, they have become one of the most
pressing problems that confronted the international community and began to actively
seek mechanisms for combating this phenomenon (Eoghan Casey, 2011, Marie-Helen
Maras, 2016), in particular:
– in 2001, the Convention on Cybercrime was adopted in Budapest. This document sets
out a list of cybercrimes and the procedural provisions necessary to combat
cybercrime, including the collection and sharing of electronic evidence (Convention on
Cybercrime 2001);
– in 2002, the First International Strategic Congress on Cybercrime “E-Crime Congress
2002” devoted to the problems of fighting electronic crimes was held in London. At
the congress, the representatives of law enforcement agencies of different countries
and IT industry discussed issues of effective counteraction to cybercrime
(Gutsalyuk M. V. Fighting Cybercrimes, 2002);
– in 2004, in accordance with Regulation (EU) No 460/2004, the European Network and
Information Security Agency (ENISA) was established, whose main task was to
improve network and information security in the European Union (Regulation (EC) No
460/2004);
– in 2007, the International Telecommunication Union (ITU) developed the Global
Cybersecurity Program (GCA) as a framework for international cooperation aimed at
enhancing confidence and security in the information society (Global Cybersecurity
Agenda, 2007);
– in 2010, at the UN a group of experts was created to conduct cybercrime research.
The group prepared a comprehensive study of cybercrime (Comprehensive Draft
Study on Cybercrime, 2013);
– in 2011, the International Strategy for Cyberspace was developed in the USA
(International Strategy for Cyberspace, 2011);
– in 2013, the EU Directive on cyberattacks on information systems was adopted
(Directive 2013/40/EU);
– in 2013, in accordance with Regulation (EU) No 526/2013, the European Union Agency
for Network and Information Security was established and Regulation (EU)
No 460/2004 was repealed (Regulation (EU) No 526/2013);
– in 2013, Europol set up the European Cybercrime Centre (EC3) in 2013 to strengthen
the law enforcement response to cybercrime in the EU and thus to help protect
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
21
European citizens, businesses and governments from online crime (European
Cybercrime Centre, 2013);
– in 2014, the National Institute of Standards and Technology developed a Critical
Infrastructure Framework for Critical Infrastructure Facilities to detect, prevent and
respond to cyberattacks (Framework for Improving Critical Infrastructure
Cybersecurity, 2014). In April 2018, a new version 1.1 of this document was released;
– in 2016, EU Directive 2016/1148 on measures to ensure a high overall level of safety
of network and information systems throughout the Union was adopted (Directive
(EU) 2016/1148, 2016);
– in 2017, European Commission President Jean-Claude Juncker announced a Cyber
Security package setting out measures of responding to the change cyber-threats
landscape (Cyber Security Package, 2017);
– in 2018, the General Data Protection Regulation (GDPR), the European Union directive
on the use of personal data, has come into force (General Data Protection Regulation,
2018);
– in 2019, Europol announced the adoption of a new protocol for how law enforcement
authorities in the European Union and beyond will respond to major cross-border
cyberattacks. The new protocol, adopted by the Council of the EU, is part of the EU’s
Blueprint for Coordinated Response to Large-Scale Cross-Border Cybersecurity
Incidents and Crises, and it will be implemented by Europol’s European Cybercrime
Centre (EC3) (EU Adopts New Response Protocol for Major Cyberattacks, 2019).
It should be noted that in recent years all developed countries have also adopted relevant
national legislation on the criminal prosecution of cybercrime, developed strategies to
combat them and created the appropriate law enforcement units (Gutsalyuk, 2016).
The current state of affairs and the latest cyber security challenges
However, cybercrime continues to spread and grow. According to survey of PWC
(PricewaterhouseCoopers), cybercrime was more than twice as likely than any other
fraud to be identified as the most disruptive and serious economic crime expected to
impact organizations in the next two years (PwC’s Global Economic Crime and Fraud
Survey, 2018).
Experts of the World Economic Forum in Davos in January 2018 published an annual
report on global risks in the world, entitled “Global Risks Report 2018” (Global Risks
Report, 2018). Based on its concepts, cyberattacks are in the second place in terms of
negative influence for the world community after extreme weather events (i.g., a year
ago technological risks along with cybercrime occupied the third place). The report states
that the risks of cyber security are constantly increasing. For example, cyberattacks on
businesses have doubled in the past five years, and incidents that were once considered
extreme have become more common today, and hackers attack computers and networks
at “almost constant speed” – every 39 seconds there is one cyberattack (Milkovich Devon,
2019).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
22
Lloyd’s of London said in a report that major, global cyberattack could trigger an average
of $53 billion of economic losses, including losses from the WannaCry attack in May 2017,
which affected 300,000 computers in 150 countries, amounting to $850 million and from
attacks on another computer virus that spread in Ukraine in June 2017 amounted to $850
million (Gutsalyuk, Klymenko, 2017; Global cyberattack could spur $53 billion in losses,
2017).
According to the 2018 Cyber Incident Statistics (ENISA) malicious activity and system
crashes are the dominant cause of reported incidents: system crashes make up 39% of
the total cases (36% in 2017, respectively). Malware rose to 39% (up from 7% in 2017)
(Annual report Trust Services Security Incidents, 2018).
In the modern era of strategic competition, cyber espionage is taking a new leap. The
UK’s Government Code and Cipher School (GCCS) estimates that there are 34 separate
nations that have serious well-funded cyber espionage teams. These state-based threat
actor teams are comprised of computer programmers, engineers, and scientists that form
military and intelligence agency hacking clusters. They have tremendous financial
backing and unlimited technological resources that help them evolve their techniques
rapidly (Cyber Espionage Is Global – and Taking Warfare to a New Level, 2018).
One of the latest technological tools for cyberattacks, which are currently actively
developing, is the use of Machine Learning and Artificial intelligence – AI. Since it is
becoming easier to create viruses and carry out large-scale attacks over time, around
organized cybercrime today there is a massive cybernetic subculture, and in the coming
years, the level of cybercrime and the active self-organization of hackers are expected
to increase.
In addition, more and more countries are implementing cyberforces that can influence
the infrastructure of the “opponents”. According to the UN Secretary-General, Antonio
Guterres, during a speech at the University of Lisbon on February 19, 2018: “The next
war will begin with a mass cyberattack aimed to destroy military capabilities and to
paralyze basic infrastructure such as electrical grids”. Guterres called for the unification
of the world community in order to minimize the influence of cyber wars on the lives of
civilians and suggested creating a platform in the United Nations on the basis of which
scientists, officials and others could develop rules “to ensure a more human nature” in
resolving any conflict related to information technologies (Khalip Andrei, 2018).
One of the current trends in information technology is the large-scale introduction in
most countries of cryptocurrencies, which become a complete payment instrument and
investment asset. The total market capitalization of the cryptocurrencies in 2017
exceeded $500 billion US dollars. However, it should be noted that Bitcoin and other
digital currencies are adapted for use by organized criminal groups, since they are widely
used in international circulation and provide the necessary level of anonymity. For
example, in 2017, during the kidnapping of people in Kyiv, Vinnitsa, Odessa (Ukraine),
cybercriminals demanded a ransom in a crypto currency in the amount of several million
US dollars (Of the 507 abductions in 4 cases, the perpetrators demanded a ransom in
bitcoins, – National Police, 2018).
Because of the high cost of the cryptocurrency, it attracts the intruders. In January 2018,
one of the largest digital exchanges in Japan, Coincheck, reported a loss of about $534
million in cryptocurrency due to a hacker attack on its network. The Exchange will
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
23
reimburse 260,000 customers at its own expense (Coincheck promises 46bn yen refund
after cryptocurrency theft, 2018).
It is also becoming common the term “cryptojacking” – the secret use of computers for
mining the crypto currency. The research team at Palo Alto Networks 42 has revealed a
large-scale operation on mining Monero, which has been active for 4 months. The number
of victims affected by this operation is approximately 15 million people worldwide
(Grunzweig Josh, 2018).
Given the fact that the extent of cybercrime is constantly increasing, Interpol, in February
2017, has developed a Global Strategy to Combat Cybercrime. The document states that
law enforcement agencies face problems related to a cross-border investigation, a variety
of legislation and technological opportunities around the world. The program to combat
cybercrime is coordinated by Interpol through the Global Complex for Innovation in
Singapore, which is equipped with a digital forensics laboratory and an innovation center
that provides Interpol with the ability to provide a consistent and effective approach to
combating all forms of transnational crime.
The report of the European Cybercrime Centre (EС3) – “Internet Organized Crime Threat
Assessment” – IOCTA evaluated key events, changes and threats in the field of
cybercrime in 2019, and made the following key findings:
– ransomware remains the top threat. Attackers focus on fewer but more profitable
targets and greater economic damage;
– data remains a key target, commodity and enabler for cybercrime;
– following the increase of destructive ransomware, such as the Germanwiper attacks
of 2019, there is a growing concern within organisations over attacks of sabotage;
– continuous efforts are needed to further synergise the network and information
security sector and the cyber law enforcement authorities to improve the overall cyber
resilience and cybersecurity;
– the dark web remains the key online enabler for trade in an extensive range of criminal
products and services and a priority threat for law enforcement;
– terrorist groups are often early adopters of new technologies, exploiting emerging
platforms for their online communication and distribution strategies.
The report of the European Cybercrime Centre provides the following recommendations
for counteracting organized cybercrime: a) law enforcement agencies should continue to
focus on the actors that develop and provide tools and services for cyberattacks; b) law
enforcement and the private sector should continue to work together to analyze threats
and initiatives such as the project “No More Ransom” to raise awareness and provide
advice and free tools for deciphering cyberattack data; c) today’s ransomware developers
are increasingly relying on social engineering. Training of employees of organizations on
counteraction to attempts of social engineering will prevent many cyberattacks. Today,
the probability of personal data thefts has increased significantly (while hacking the
information system of one of the corporations, the attackers seized personal information
of 147 million people) (Equifax to Pay $575m in Data Breach Settlement, 2019). More
than a million fingerprints and other sensitive data have been exposed online by a
biometric security firm, researchers say (Baraniuk Chris, 2019).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
24
Future threats and challenges
In general, we can state that at the present the number of cybercrimes directed to mobile
platforms is growing most dynamically, in which the number of ransomware detections
has doubled in recent years. Dangerous in the expert environment is also considered the
dynamic development of the Internet of things (IoT), with the use of which it is projected
an increase of the number of cyberattacks.
In this regard Japan has approved a law amendment which allows government officials
to hack into people’s Internet of Things (IoT) devices. The amendment is part of a survey
investigating the number of vulnerable IoT devices carried out by the National Institute
of Information and Communications Technology (NICT) under the supervision of the
Ministry of Internal Affairs and Communications (MIC). Japan is carrying out the survey
to prevent the devices from being harnessed for a cyberattack targeting infrastructure
supporting the Tokyo Olympic Games in 2020. NICT employees will have permission to
attempt the hacking of IoT devices using default passwords and password dictionaries.
Users leaving passwords set as their device manufacturer’s default is often how devices
are compromised. Japan’s approach is an unprecedented but proactive way of dealing
with the IoT security problem. A report published by the MIC highlighted two-thirds of
cyberattacks in 2016 were targeted at IoT devices (Daws Ryan, 2019).
Among the factors that hinder the counteraction of organized crime in cyberspace, remain
the following: a) transnational nature of offenses, which consists in the fact that the place
of commission, the instrument of crime, the victims and the offender may be under
different territorial jurisdictions and there is a need for many formal interstate
agreements to investigate such crimes, which significantly slows down their conduct; b)
high level of technical training of criminals; c) problems of collecting electronic (digital)
evidence that can be rapidly changed or even destroyed; d) the difficulty of identifying
offenders – since the individual “signatures” of offenders is leveled by a standardized
instrument of commission – by software and technological support; e) lack of sufficient
judicial practice in criminal cases on organized crime in the field of information
technology.
Due to the fact that computer data can be easily altered or even destroyed, Articles 16–
21 of the Cybercrime Convention 2001 provide for the application of legislative and other
measures for the urgent storage of computer data, data traffic, interception and real-
time information recording time scale to be implemented by all signatory states. It is
advisable to exchange such information through the relevant 24/7 points created in all
countries. However, due to various circumstances, responses to requests for such
information may be delayed for a long time, rendering such information out of date and
preventing cybercrime investigation. Therefore, international cooperation in this area
needs improvement.
For proper investigation of cybercrimes, it is important to organize close cooperation of
law enforcement agencies with service providers (Internet providers) for rapid disclosure
of data, and to improve mutual legal assistance procedures that relate to electronic data
in order to promptly obtain electronic evidence. At the same time, law enforcement
agencies already have a significant positive experience of intergovernmental cooperation
in combating cybercrime.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
25
A striking example of this was the operation to eliminate the cyber network “Avalanche”,
which functioned for about 7 years and infected thousands of computers daily, and the
financial losses from attacks amount to more than 100 million Euros. The investigation
was conducted by the Verdun Prosecutor’s Office and the police in Lüneburg (Germany)
in close cooperation with the Ministry of Justice and the FBI, Eurojust, Europol and global
partners. 178 people were arrested by law enforcers with the support of the European
Cybercrime Center (EC3) and the Joint Cybercrime Action Taskforce (J-CAT) as well as
Eurojust and the European Banking Federation (EBF). On the territory of Europe, 580 so
called “drones” (persons involved in cashing in of money) were identified. A successful
attack on this international organized criminal group was supported by 106 banks and
private partners. More than 130 TB of collected data were analyzed at the stage of
preparation of a special operation by cyberpolice. During the joint operation, conducted
on the 30
th
of November 2016 in 30 countries, five network organizers were detained.
Three of them are Ukrainians; one was detained in Germany, two more – on the territory
of Ukraine. One of the organizers of the criminal group is charged with 1152 crimes,
which caused a loss of 6 million Euros (‘Avalanche’ network dismantled in international
cyber operation, 2016).
And in February 2018, the US Department of Justice filed a charge of cyber-scam about
36 people suspected of participating in the international groupings of the Infraud
Organization, created by a citizen of Ukraine. It is noted that the group stole more than
$530 million. Organization illegally received and sold personal data of network users, was
engaged in hacking of banking and electronic accounts, and also distributed malicious
software. According to US law enforcement officers, about 11,000 people were involved
in the Infraud Organization, most of whom never met personally (Thirty-six Defendants
Indicted…, 2018).
With the growing popularity of the Internet, and given that e-commerce is becoming the
most important part of the economy with turnover, measured by trillions of US dollars
(Retail e-commerce sales worldwide from 2014 to 2021, 2019), the number of
cybercrime will increase accordingly. Therefore, there is a need to create and use
national, and ideally even international, means of information analysis. Moreover,
cybercrimes require an analysis for a shorter period than days, weeks, or even months,
which tend to be based on the analysis of traditional crimes. At the same time, it should
be noted that human rights organizations argue that massive amounts of accumulated
information do not allow systematically prevent cybercrime, and instead, mass storage
of personal data opens up wide opportunities for various kinds of abuse. Given this, on
May 2014 decision by the European Court of Justice (ECJ) declared that the European
Data Retention Directive was a gross violation of privacy rights under European law and,
therefore, was invalid (Judgment of the Court of Justice of the European Union, 2014).
Finally, in addition to combating cybercrime, a necessary element of the safe and efficient
functioning of a digital society is the reliable identification of its participants. As we know,
all criminals are trying to hide their identity, so in contrast to Darknet, whose main
feature is anonymity, you need to create electronic services that only work with verified
users. Electronic digital signatures, or other mechanisms, such as electronic ID
documents, are likely to be used for verification to ensure that both the user of the
service and the Internet resource are verified. This in turn will significantly reduce the
number of cyber frauds and other offenses in cyberspace.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
26
Conclusions
In our opinion, among the issues of effective counteraction to cybercrime are still relevant
today the following:
1. Development rules of law for conducting searches of electronic evidence, taking into
account the possibility of finding it in different jurisdictions (Khakhanovskyi, Hutsaliuk,
2019).
2. Development of specialized software and hardware for the collection, storage and
analysis of electronic evidence, including large computer evidence cases.
3. Improvement of the network of National Contact Points for Responding to Cybercrime
(24/7) and existing International Legal Assistance mechanisms.
4. Organization of close cooperation between law enforcement agencies and providers
for obtaining electronic evidence.
5. Regular rising of qualifications of investigators and other involved law enforcement
officers in order to study topical issues of the tactics of conducting investigative actions
to obtain electronic evidence in the cybercrime investigation.
6. In order to increase the effectiveness of cybercrime investigations, specialized
structural units should be established in both the police and prosecutors’ offices, and
possibly specialized courts.
7. Increasing the level of cyber security in both public and private sectors, as well as
developing new technologies for protecting and identifying users of cyberspace. The
Global Cybersecurity Center, created in Geneva under the auspices of the World
Economic Forum, should assist in close collaboration of business, academics and
government officials on cyber security.
Only through cooperation of all stakeholders, information exchange and common
standards, the world community will be able to successfully counter cybercrime. The
fulfillment of these measures will allow obtaining in full the advantages of the digital
society.
References
‘Avalanche’ network dismantled in international cyber operation (The Hague, 01
December 2016). [Accessed on 16 September 2019]. Available at:
http://www.eurojust.europa.eu/press/PressReleases/Pages/2016/2016-12-01.aspx.
Annual report Trust Services Security Incidents 2018 [Accessed on 8 September 2019].
Available at: https://www.enisa.europa.eu/news/enisa-news/annual-report-trust-services-
security-incidents-2018.
Baraniuk Chris. Biostar security software ‘leaked a million fingerprints’ (August 14, 2019)
[Accessed on 15 September 2019]. Available at:
https://www.bbc.com/news/technology-49343774.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
27
Coincheck promises 46bn yen refund after cryptocurrency theft (January 28, 2018)
[Accessed on 10 September 2019]. Available at: http://www.bbc.com/news/world-asia-
42850194.
Comprehensive Draft Study on Cybercrime (Draft – February 2013) [Accessed on 26
August 2019]. Available at: https://www.unodc.org/documents/organized-
crime/cybercrime/CYBERCRIME_STUDY_210213.pdf.
Convention on Cybercrime 2001 [Accessed on 23 August 2019]. Available at:
https://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/185.
Cyber Espionage Is Global – and Taking Warfare to a New Level (2018). [Accessed on 9
September 2019]. Available at:
https://www.carbonblack.com/resources/definitions/what-is-cyber-espionage/.
Cyber Security Package (2017) [Accessed on 3 September 2019]. Available at:
https://www.dccae.gov.ie/en-ie/communications/topics/Internet-Policy/cyber-
security/cyber-security-package/Pages/default.aspx.
Daws Ryan. Japan’s law now allows it to hack people’s IoT devices (January 29, 2019).
[Accessed on 15 September 2019]. Available at:
https://www.iottechnews.com/news/2019/jan/29/japan-law-hack-iot-devices/.
Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016
concerning measures for a high common level of security of network and information
systems across the Union (2016) [Accessed on 2 September 2019]. Available at:
http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=uriserv%3AOJ.L_.2016.194.01.0001.01.ENG.
Directive 2013/40/EU of the European Parliament and of the Council of 12 August 2013
on attacks against information systems and replacing Council Framework Decision
2005/222/JHA [Accessed on 28 August 2019]. Available at: http://eur-
lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32013L0040.
Eoghan Casey. Digital Evidence and Computer Crime: Forensic Science, Computers, and
the Internet, Academic Press, 2011. P. 840.
Equifax to Pay $575m in Data Breach Settlement (July 22, 2019) [Accessed on 12
September 2019]. Available at: https://www.phishprotection.com/watchdog/.
EU Adopts New Response Protocol for Major Cyberattacks (2019) [Accessed on 5
September 2019]. Available at: https://www.securityweek.com/eu-adopts-new-
response-protocol-major-cyberattacks.
EU budget: Commission proposes € 9.2 billion investment in first ever digital programme
(Brussels, 6 June 2018). [Accessed on 23 August 2019]. Available at:
https://europa.eu/rapid/press-release_IP-18-4043_en.htm.
European Cybercrime Centre (2013) [Accessed on 1 September 2019]. Available at:
https://www.europol.europa.eu/about-europol/european-cybercrime-centre-ec3.
Framework for Improving Critical Infrastructure Cybersecurity (2014) [Accessed on 2
September 2019]. Available at: https://www.nist.gov/publications/framework-
improving-critical-infrastructure-cybersecurity-version-11.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
28
Free video conferencing: Coronavirus spurs special deals from WebEx, Google, others
URL: [Accessed on 30 March 2020] Available at: https://www.zdnet.com/article/video-
conferencing-deals-coronavirus-spurs-offers-from-webex-google-and-others/.
General Data Protection Regulation (2018) [Accessed on 3 September 2019]. Available
at: https://gdpr-info.eu/.
Global cyberattack could spur $53 billion in losses: Lloyd’s of London (2017) [Accessed on
8 September 2019]. Available at: https://www.cnbc.com/2017/07/17/global-cyberattack-
could-spur-53-billion-in-losses-lloyds-of-london.html.
Global Cybersecurity Agenda (GCA) (2007) [Accessed on 26 August 2019]. Available at:
http://www.itu.int/en/action/cybersecurity/Pages/gca.aspx.
Global Risks Report 2018 [Accessed on 7 September 2019]. Available at:
https://www.weforum.org/reports/the-global-risks-report-2018.
Grunzweig Josh. Large Scale Monero Cryptocurrency Mining Operation using XMRig
(January 24, 2018) [Accessed on 12 September 2019]. Available at:
https://unit42.paloaltonetworks.com/unit42-large-scale-monero-cryptocurrency-
mining-operation-using-xmrig.
Gutsalyuk Mykhaylo, Klymenko Olga. Combate á criminalidade cibernética e garantias de
segurança cibernética na Ucrânia // Lusiada. Política Internacional e Segurança, 2017,
nª15. P. 51–65. [online] Available at:
http://revistas.lis.ulusiada.pt/index.php/lpis/article/view/2506/pdf [Accessed 2 March
2018].
Gutsalyuk Mykhaylo. Ukraine’s Cybersecurity Strategy and Ways to Implement It //
European Cybersecurity Journal. – Volume 2 (2016). The Kosciuszko Institute. Poland. –
P. 65–69. [Accessed on 6 September 2019]. Available at:
https://twitter.com/i/moments/781827366100140032.
Gutsalyuk M. V. Fighting Cybercrimes (2002) [Accessed on 24 August 2019]. Available
at: http://www.crime-research.org/library/Gutsaluk.html.
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32004R0460.
International Strategy for Cyberspace. Prosperity, Security and Openness in a Networked
World (May 2011) [Accessed on 28 August 2019]. Available at:
https://obamawhitehouse.archives.gov/sites/default/files/rss_viewer/international_stra
tegy_for_cyberspace.pdf.
Internet live stats (2019) [Accessed on 23 August 2019]. Available at:
http://www.internetlivestats.com.
Internet Organized Crime Threat Assessment (IOCTA) (2019) [Accessed on 11 October
2019]. Available at: https://www.europol.europa.eu/iocta-report.
Judgment of the Court of Justice of the European Union (Date of decision/judgment:
13/05/2014) / ECLI:EU:C:2014:317. [Accessed on 17 September 2019]. Available at:
http://curia.europa.eu/juris/document/document.jsf?text=&docid=152065&doclang=E
N.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.18-29
Combating cybercrime as a prerequisite for the development of the digital society
Olga A. Klymenko, Mykhaylo V. Gutsalyuk, Andrii V. Savchenko
29
Khakhanovskyi Valerii, Hutsaliuk Mykhaylo. The Peculiarities of Digital Evidence Use in
Criminal Proceedings // Kryminalistychnyi Visnyk, Vol 31, No 1 (2019). pp. 13–19.
DOI: https://doi.org/10.37025/1992-4437/2019-31-1-13.
Khalip Andrei. U.N. chief urges global rules for cyber warfare (February 19, 2018) [Accessed
on 8 September 2019]. Available at: https://www.reuters.com/article/us-un-guterres-
cyber/u-n-chief-urges-global-rules-for-cyber-warfare-idUSKCN1G31Q4.
Marie-Helen Maras. Cybercriminology. Oxford University Press, 2016. P. 448.
Milkovich Devon. 15 Alarming Cyber Security Facts and Stats (September 23,
2019) [Accessed on 25 September 2019]. https://www.cybintsolutions.com/cyber-
security-facts-stats/.
Of the 507 abductions in 4 cases, the perpetrators demanded a ransom in bitcoins, –
National Police (January 26, 2018) [Accessed on 10 September 2019]. Available at:
https://112.ua/obshchestvo/iz-507-pohishheniy-v-4-sluchayah-zloumyshlenniki-
trebovali-vykup-v-bitkoinah-nacpoliciya-430498.html.
PwC’s Global Economic Crime and Fraud Survey 2018 [Accessed on 6 September 2019].
Available at: https://www.pwc.com/gx/en/services/advisory/forensics/economic-crime-
survey.html.
Regulation (EC) No 460/2004 of the European Parliament and of the Council of 10 March
2004 establishing the European Network and Information Security Agency (Text with EEA
relevance) [Accessed on 25 August 2019]. Available at:
Regulation (EU) No 526/2013 of the European Parliament and of the Council of 21 May
2013 concerning the European Union Agency for Network and Information Security
(ENISA) and repealing Regulation (EC) No 460/2004 (Text with EEA relevance) [Accessed
on 1 September 2019]. Available at: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:32013R0526.
Retail e-commerce sales worldwide from 2014 to 2021 (in billion U.S. dollars) / By J.
Clement, last edited Aug 30, 2019 [Accessed on 17 September 2019]. Available at:
https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/.
Thirty-six Defendants Indicted for Alleged Roles in Transnational Criminal Organization
Responsible for More than $530 Million in Losses from Cybercrimes (Wednesday,
February 7, 2018) / Department of Justice / Office of Public Affairs. [Accessed on 16
September 2019]. Available at: https://www.justice.gov/opa/pr/thirty-six-defendants-
indicted-alleged-roles-transnational-criminal-organization-responsible.
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 30-40
VERBAL COMMUNICATION: AN ESSENTIAL FACTOR IN INTERNATIONAL TRADE
Sandra Ribeiro
sandra.chillout@gmail.com
OBSERVARE, Observatory for External Relations, Universidade Autónoma de Lisboa (Portugal)
Maria João Ferro
mjoaofv@gmail.com
Linguistics Centre of Universidade Nova de Lisboa (CLUNL)
Instituto Superior de Contabilidade e Administração de Lisboa (ISCAL, Portugal)
Abstract
Establishing a business relationship is a complex action influenced by different variables. When
we approach the international context, the complexity becomes even greater, with
communication between commercial actors playing a crucial role. In this sense, the promotion
of effective and unimpeded verbal communication between international partners is crucial
for the success of any transaction.
It is in this context that economics of language gains relevance, allowing the inclusion of the
language spoken by the commercial partners as one of the explanatory factors of international
trade, assuming in the explanatory gravitational models of trade flows between countries the
role of facilitator of trade exchanges or, on the contrary, of an obstacle to the commercial
relationship.
Studies in the area of economics of language reveal that economic relations are strongly
influenced by language, but language choices can also be influenced by economic factors,
which is why this is a bilateral relationship. The study we present here focuses on how verbal
communication (measured according to linguistic proximity, that is, a greater or lesser degree
of similarity between the language spoken by two business partners) influences the
commercial relations established in an international context. In this study, we conclude that,
based on data on the volume of Portuguese exports in 2015, the ease of verbal communication
with the trading partner has a positive influence on the increase in trade - in empirical terms,
this conclusion is corroborated by the fact that Spain is Portugal's main trading partner.
We conclude that the language factor is not being well used by the Portuguese State, as the
linguistic proximity could be used to increase Portuguese exports, namely with the countries
that compose the Community of Portuguese Speaking Countries (CPLP) and with those that
integrate the Southern Common Market (Mercosur).
Keywords
International Trade, Verbal Communication, International Economics, Gravitational Model,
Multilingualism
How to cite this article
Ribeiro, Sandra; Ferro, Maria João (2020). "Verbal communication: an essential factor in
imternational trade". JANUS.NET e-journal of International Relations, Vol. 11, N.º 1, May-
October 2020. Consulted [online] on the date of the last visit, https://doi.org/10.26619/1647-
7251.11.1.3
Article received on August 13, 2019 and accepted for publication on March 30, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
31
VERBAL COMMUNICATION: AN ESSENTIAL FACTOR IN INTERNATIONAL TRADE
Sandra Ribeiro
Maria João Ferro
1. Introduction
People cannot go about in society unlsess there is system that allows communicating
with others. Although communication is not exclusive to humans, as there are animals
that also have structured systems that allow communication among members of species,
human language stands out due to its huge creative potential - with a limited number of
linguistic signs, human beings are capable of producing an unlimited number of
expressions. However, communication does not depend only on verbal language, as non-
verbal communication plays a fundamental role in the success of human interaction -
gestures, facial expressions, silence, all these elements contribute to the establishment
of interpersonal relationships.
It is in this line that the development of bilateral commercial relations lies: without the
existence of a structured and shared system, interpersonal, inter-group and inter-
organization relationships are not possible; therefore, trade is, if not impossible, at least
extremely difficult when there is no linguistic basis for understanding.
In this article, our aim is to demonstrate the importance of verbal communication in
international trade, embodied in the “language” factor, the structured and shared
communication system that guarantees understanding between business partners. We
will start by examining the topic of economics of language, and then move on to the
analysis of the role of verbal communication in international trade. In point 4, we will
address communication as a determining factor in gravitational models, followed by the
presentation of the methodology and results. Finally, we conclude with some
observations and recommendations.
2. The Economics of Language
The relationship between language and economic science was formally described in the
1960s by Jacob Marschak (1965), who coined the expression “economics of language”.
In his analysis, the author examined economic concepts, such as cost and benefit, applied
to the language.
Studies in the area of economics of language have shown that economic relations are
strongly influenced by language, but language choices can also be influenced by
economic factors, for which reason this is a bilateral relationship. The three major areas
of research in this field revolve around the following axes:
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
32
- migration: by studying, for example, the influence of mastery of the language spoken
in the host country on the personal income of immigrants;
- foreign direct investment: by analyzing how the choices that investors make can be
motivated by the language spoken in the country where they decide to invest; and
- international trade: by examining the determining role of language in bilateral
relations in the context of international trade
In all these areas of study, language stands out as a factor that can be an asset or,
conversely, a barrier in each sector of social life, both for individuals and organizations.
Considering immigration, for example, the choice of the country where the immigrant
intends to go to is often limited or, at least, influenced by, the command of the language
spoken in that country or by the ease of learning that language (Adserà and Pytliková,
2015). Thus, learning the language spoken in a country (or one of the languages spoken
in the country, in case of multilingual societies) results in a real increase in the personal
income of an immigrant. Analyzing the endogeneity between language and income,
Chiswick and Miller (1995) consider that “linguistic adjustment”, that is, the development
of fluency in the language of the host country, influences the results of the labour market,
specifically the wages that immigrants earn.
The study presented here is based on the same principle that language is a valuable
asset, but falls within the last aspect presented above, insofar as we examine how
communication (measured according to linguistic proximity, that is, a greater or lesser
degree of similarity between the language spoken by two business partners) influences
international business relationships.
3. Verbal communication and international trade
The globalization process, essentially based on economic and cultural integration, of the
last decades has been causing profound transformations, both culturally and
economically. This movement has been intensified exponentially by the creation and
popularization of several technologies that have played a fundamental role not only for
the development of the world economy, but also at cultural level. The communication
networks in this globalized world, increasingly faster and more efficient, allowed
communication and quick access to any part of the globe instantly, thus contributing to
the intensification of international exchanges. International trade represents the
unlimited expansion of the markets for the countries’ economies. This process has
accelerated exponentially thanks to fast communications.
Rahman (2014) argues that companies that try to “conspire” are able to obtain
substantial benefits in terms of communication, especially with the help of a commercial
association. Verbal language is essential for communication in a trade context,
influencing several aspects in the economic area, such as effective communication in
business and international trade, employment opportunities and tourism, among others.
From the point of view of organizations, language can also become a barrier or an
incentive. For Ginsburgh and Weber (2018, p. 6), “Learning (or not learning) foreign
languages results from several economic incentives. The main one is obviously trade”.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
33
Among other relevant aspects, the choice of a business partner must consider the
communication possibilities between both partners. Ferro and Ribeiro (2016) present five
language strategies that business partners can use in the specific case of communication
when establishing a business relationship, as follows:
- both partners can master the same language and, therefore, use it to communicate,
as, for example, the case of communication between a Brazilian company and a
Portuguese one, since Portuguese is the official language of both countries;
- partners can resort to intercomprehension, that is, each partner can use its own
language and be understood by the other - to a certain extent, this is a viable
possibility when establishing a commercial relationship between Portugal and Spain,
given that communication is close between Portuguese and Spanish speakers, with
the caveat, as defended by Ferro and Costa (2016), that Portuguese speakers find it
easier to understand Spanish speakers, not only for cultural reasons that influence the
attitude of Spanish speakers, but also, very concretely, for phonetic reasons, which
have to do, among other aspects, with the characteristic of Portuguese vowels;
- both partners can choose one of their languages, as long as the other masters it - for
many years French was the main foreign language spoken in Portugal; despite being
gradually replaced by English, it still remains one of the foreign languages most spoken
by the Portuguese (European Commission, 2012). Thus, and in the case of a
Portuguese company wishing to establish a business relationship with a French
company, there will be the possibility of communicating in French;
- in the absence of a common language, partners may choose to use a foreign language
that they both master and which may possibly be a lingua franca in their sector of
activity or in the geographical region where they are - for a Portuguese company, that
language may be English, the most widely spoken and learned foreign language in
Portugal today (European Commission, 2012; Eurostat, 2015);
- if none of the possibilities for direct communication listed above is feasible, it will be
possible to establish communication through a mediator, who may be a language
professional (a translator or an interpreter) or someone who acts in the market in
question specifically as an intermediary.
Following a study on the role of language in international trade, Melitz (2008, p. 672)
argues:
The underlying hypotheses about the signs of the influences of the
language variables in the study are fairly intuitive, but their full
importance comes out best when we focus on the possible
substitution between domestic and foreign trade. Different
languages are impediments to communication, therefore trade.
To overcome communication barriers to the establishment of bilateral trade, it is not only
the sharing of a common language that can improve communication between business
partners and act as a facilitator of these relationships. Linguistic proximity, that is, the
fact that two languages share many features (such as Portuguese, Spanish, French,
Catalan, and Italian, which are all Romance languages with great affinity) makes it easier
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
34
for speakers of one of the languages to learn another, which will also have positive
repercussions on international trade.
4. Communication as a determining factor in gravitational models
Tinbergen (1962) pioneered the application of the law of gravity equation to analyze
international trade flows, making the international trade gravitational model based on
Newton's theory of gravity. Since then, the gravitational model has become a popular
instrument in the empirical analysis of international trade. Meltiz (2008) argues that the
use of the gravitational model implies the existence of two basic advantages: first, the
model has been the exclusive tool in similar research conducted so far and, secondly,
and more significantly, he considers that the model is particularly suitable as it focuses
on barriers to trade.
According to the basic gravitational model, exports from country i to country j are
explained, at first, by their economic dimension (GDP or GNP), and by their direct
geographical distances. Thus, it concludes that exports between two countries are
positively related to the size of their economies and negatively related to factors that
indicate the existence of barriers to trade, of which the most important is the distance
between the two countries. The initial model is represented by the models (1) and (2)
presented below:
T
ij
= f [
(GDP
𝑖
GDP
𝑗
)
D
𝑖𝑗
] (1)
T
ij
= β
0
(GDP
i
. GDP
j
)
β
1
. D
ij
β
2
. e
ε
(2)
Subsequently, the model underwent some changes and new variables were added. In
this sense, many considered only the characteristic of some variable, constituting a
dummy variable (a binary variable that assumes the value of 1 when the characteristic
to be analyzed is present, and 0 otherwise).
Over time, the initial model has been improved and expanded with several variables that
intend to explain trade flows between two countries. Thus, besides the basic variables
considered by the model (GDP and distance), other variables were added, such as
population, GDP per capita (Bergstrand, 1990), country size, and communicatio affinity.
In this sense, Melitz and Toubal (2014) refer that the gravitational models used to explain
international trade generally include some linguistic variable, which may correspond to
the country’s official language and/or to foreign languages mastered by a large part of
the country’s population. Several studies like those by Helliwell (1998), Melitz (2008),
Egger and Lassmann (2012) have already established the relationship between the
sharing of a common language and the volume of commercial transactions between two
countries. Meltiz (2008) states that, without controlling other barriers and capital gains
for trade besides language – distance, political association, relations between former
colonies and others – it would be difficult, if not impossible, to make inferences about
linguistic effects as such.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
35
The equation of the gravitational model implies the logarithmization of its variables,
originating a log-log model. Thus, an example of an augmented model of other variables
can be presented as in model (3), in the following form:
Ln(T
ij
) = β
0
+ β
1
Ln (GDP
i
GDPj) + β
2
LnD
ij
+ β
3
Lang
ij
+ β
4
Cont
ij
+ β
5
RTA
ij
+ ε
ij
(3)
Where i and j represent countries and the variables are defined as:
T
– volume of trade (considering just exports or just imports, or both) between two countries;
GDP – Real GDP;
D – Distance;
Lang – dummy variable that takes the value 1 when i and j share a common language and 0
otherwise;
Cont – dummy variable that takes the value 1 when i and j share a common border and 0 otherwise;
RTA – dummy variable that takes the value 1 when i and j belong to a free trade area and 0
otherwise.
The “linguistic proximity” “variable” is often used in order to quantify the proximity
between two languages. This has been used in the past by several authors: Chiswick and
Miller (2005) used the results of assessment tests in the context of learning a foreign
language; Melitz (2008) made the division between open-circuit languages and direct-
communication languages; Lohman (2011) created the Language Barrier Index. Ferro
and Ribeiro (2016) created a method of classifying linguistic proximity based on linguistic
criteria, specifically etymological criteria, from which they organized languages according
to the linguistic family to which they belong.
5. Methodology and results
In order to analyze the relationship between Portuguese exports and the linguistic
proximity between Portugal and the countries considered to be its main trading partners,
we have prepared several studies. In all of them, we used the gravitational model, which
is the most commonly used econometric instrument for the study of international trade,
and its theoretical foundations were explored, for example, in the works of Anderson
(1979), Helpman and Krugman (1985) and Kalirajan (1999). The increase in the use of
this model is mainly due to its ease of implementation, as well as the success it has had
in the analysis of trade flows from several countries, and even economic blocs.
Although our focus is on verbal communication, it should be noted that gravitational
models include other variables whose authors consider to be capable of explaining
international trade. Many studies have been carried out relating these variables.
Egger and Lassmann (2012) analyzed the effect of 701 coefficients captured by linguistic
distances in 81 articles published between 1970 and 2011 in 24 journals. They conclude
that, for a distance of less than 10% between the two countries, their trade increases by
about 5%. Melitz and Toubal (2014), on the other hand, used the bilateral trade model
(for 200,000 observations on transactions carried out from 1998 to 2007) in order to
unravel the many effects that languages can have on trade. Accordingly, they built four
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
36
types of bilateral distances between countries: common official language, common
mother tongue, common spoken language and linguistic distances, as they consider that
each of them has a specific role in facilitating communication between the citizens of both
countries involved in trade. Krisztin and Fischer (2014) also use the dummy variable
“common language” in the gravitational model in the study of 21,170 observations that
translate bilateral flows between 146x145 country pairs. They conclude that the impact
on trade flows may be close to 90% greater if countries share the same language.
In this context, we have also carried out several studies relating trade flows between
countries with linguistic proximity. In Ferro and Ribeiro (2016), 56 main Portuguese
trading partner countries (in 2013) were grouped according to their language families.
The criteria underlying the classification were: (i) linguistic criteria: languages were
classified according to an etymological principle, based on their linguistic family; (ii)
similarity between languages: given that Portuguese is a Romance language, languages
belonging to that family were included in this group to explain the similarity between
them; (iii) foreign languages: including four languages: English (the foreign language
most commonly studied in Portugal), which is a Germanic language, followed by two
Romance languages (French and Spanish) and then by another Germanic language,
German. The objective was to analyze whether the fact that the language of the
commercial partner belongs to each of these language families has a direct relationship
with Portuguese exports to that country. In the study, one finds support for one of its
basic hypotheses - specifically the fact that Portuguese exports are greater to countries
that share a similar language. We thus concluded that there is a direct relationship
between the volume of Portuguese exports and the fact that the destination country has
an official Romance language. Since this is also the linguistic family of Portuguese, this
result was expected, given that when countries share the same language, the linguistic
barrier is removed, facilitating communication between them and enabling closer
communication; therefore, costs tend to be lower - the same is true, although to a much
lesser extent, when there is linguistic proximity between the languages spoken in both
countries.
Thus, we introduced a new variable called “ProxLing”, which aims to capture the linguistic
proximity between two countries. We defined this variable taking into account the official
language of the destination country, which should be Portuguese, Spanish or English.
Our objective was to capture a triple effect: with this variable, we identified the countries
that share a common language with Portugal, but we also included those that have
Spanish as an official language to reflect linguistic proximity, and those that have English
as the official language to capture the effect of the most studied and spoken foreign
language in Portugal.
Ribeiro and Ferro (2017) presented the relationship between the volume of exports from
Portugal to its 98 main trading partners around the world in 2013, considering the
countries' membership of the European Union (EU) or Mercosur, and the linguistic
proximity between the official languages of those countries and Portuguese. Taking into
account only the countries belonging to the EU economic bloc, we have organized them
according to the linguistic family to which their official language belongs. In line with a
study that we had previously conducted (Ferro and Ribeiro, 2016), we proposed a triple
approach to the influence of language on Portuguese foreign trade, after grouping the 28
EU member states according to their language families. Given that, at this stage in our
study, we were interested in isolating the two language families most relevant to
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
37
Portugal's foreign trade - taking into account the classification of Portuguese and also the
country's linguistic policies with regard to the teaching and learning of foreign languages
- we classified all other languages as belonging to the Others group, thus eliminating the
need for a more detailed classification. We concluded that there is a direct relationship
between the volume of Portuguese exports and the fact that the destination country has
an official Romance language. When two countries share the same or a very similar
language, the communication barrier is blurred or even eliminated and, consequently,
transaction costs tend to be lower. We also conclude that taking into account all EU
Member States, the volume of Portuguese exports is higher for countries whose official
language is similar to Portuguese.
Although in these studies the impact of communication on international trade is obvious,
in order to consider more recent data, we carried out the analysis of the volume of
Portuguese exports in 2015, considering Portugal’s main 61 trading partners and
studying the following equation (model 4):
Ln(Tij) = β0 + β1 Ln GDP + β2 EU + β3 LnDij + β4 ProxLingj + εij (4)
Where the variables represent the following:
T – volume of exports between two countries (in this case: Portugal and its commercial partner);
GDP – real GDP;
EU - dummy variable that takes the value 1 if the country belongs to the EU and 0 otherwise;
D – Distance;
ProxLingi – dummy variable that takes the value 1 if i and j have linguistic proximity to Portugal
(spoken language: Portuguese, Spanish or English) and 0 otherwise
Table 1 - Model estimation results (4)
Explanatory Variables
Ln Exports
MMQ coefficient
Standardized coefficient (Beta)
Constant
17,036
(1,939)
------
LnPIB
0,421
(0,53)
0,622
EU
-0,062
(0,306)
-0,021
LnD
ij
-1,109
(0,197)
-0,588
ProxLing
0,971
(0,233)
0,319
F = 30,375
R
2
= 0,685
Source: authors’ own
Remarks:
Numbers in parentheses are standard deviations. Significance level of 5%.
After conducting the regression study using the SPSS software, the impact of all the
explanatory variables in the model was analyzed taking into account the following
indicators: (i) global significance test (test F); (ii) individual significance test (test t),
considering, in both, a 5% significance level, and (iii) determination coefficient (R
2
).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
38
According to all the variables presented in the table, the results obtained reveal that the
one that has the greatest explanatory capacity at the level of exports is linguistic
proximity.
Thus, as expected, the fact that a country belongs to the EU has a positive impact on the
volume of Portuguese exports to that destination, not only due to the importance of
belonging to the same economic bloc, but also because of the relative physical proximity
between all EU member states. In fact, we could also see that the increase in distance
has a negative effect on the volume of exports, causing it to decrease by 1.109% for
each 1% increase in the number of kilometers that separate both countries (accounting
for the distance between capitals).
In previous studies (cf. Ribeiro and Ferro, 2017), we also found a direct relationship
between the volume of exports from Portugal to a given country and the official language
of that same country – if a country’s official language is a Romance one, there is a positive
relationship with great explanatory capacity between the volume of exports and the
linguistic proximity of the official languages of the two countries involved in the bilateral
relationship. This linguistic proximity was measured using the ProxLing variable, which
includes Portuguese, Spanish and English. The latter was included in the variable not
because of its effective proximity to Portuguese, as it is a language of another linguistic
family (Germanic, not Romance), but, because, due to the linguistic policies implemented
in Portugal, English is a language spoken by a large part of the population.
By blurring or eliminating the communication barrier, linguistic proximity allows
transaction costs to fall. These conclusions are consistent with the gravitational model,
as presented.
Conclusion
The increasing internationalization of economies has been implying an increasing
importance and appreciation of the language factor. Especially in a global context that
strongly propels the Portuguese economy towards internationalization, the language
factor as a facilitator of communication in international trade has proved to be an
extremely relevant axis.
In this sense, the choice of a commercial partner should take into account, among other
factors, the language factor. Since communication between economic partners is an
essential factor for the success of the relationship, it is in the interest of these partners
to eliminate, or blur, language barriers, so that they can reduce the costs of commercial
transactions.
In this study, we conclude that, with data on the volume of Portuguese exports for 2015,
the ease of verbal communication with the trading partner has a positive influence on
the increase in trade - in empirical terms, this conclusion is corroborated by the fact that
Spain is Portugal's main trading partner, highlighting the fact that, as shown, other
variables also explain it, such as geographical proximity.
In our opinion, the language issue is not being used well by the Portuguese State, as it
could take more advantage of linguistic proximity to promote bilateral commercial
relations with the countries that make up the Community of Portuguese Speaking
Countries (CPLP) and with those that make up the Southern Common Market (Mercosur).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
39
On the other hand, the importance of language policies and the influence they will have
on the training of future generations of entrepreneurs is also not widespread among the
population, despite the current focus on learning English, which is undoubtedly an asset
for generations to come.
We therefore consider that, given the relevance of linguistic proximity for the ease of
communication between business partners and, consequently, for the increase in the
volume of exports, the Portuguese State should make a set of linguistic policies aimed
precisely at promoting trade relations based on linguistic proximity.
In fact, although the course is not yet clear, the possibility of English losing some ground
as the most widely used language within the European Union is on the table. It is true
that English is unlikely, in the near future, to cease being the lingua franca in many
sectors of society, specifically in the world of business, but other languages may gain
preponderance. In a new geopolitical organization, it will be up to the languages to
reorganize themselves and concretely the Portuguese official entities will have to take
advantage of any leeway that may come, taking advantage of the economic potential
that the Portuguese language already has today.
References
Adler, R. B. & Rodman, G. (2006). Understanding human communication. 9
th
ed. New
York: Oxford University Press.
Adserà, A. & Pytliková, M. (2015). The role of language in shaping internacional
migration. The Economic Journal, 125:586 F49-F81.
Anderson, J. (1979). A theoretical foundation for the gravity equation. The American
Economic Review, 69:1; 106-116.
Bergstrans, H. (1990). The Heckscher-Ohlin-Samuelson model, the Linder hypothesis
and the determinants of bilateral intra-industry trade. The Economic Journal, 100:403
1216-1229.
Chiswick, B. R. e P. W. Miller (1995). “The Endogeneity between Language and Earnings:
International Analyses.” Journal of Labor Economics, 3:2, 246-288.
Chiswick, R. e Miller, W. (2005). Linguistic distance: A quantitative measure of the
distance between English and other languages. Journal of Multilingual and Multicultural
Development, 26:1 1-11.
European Comission (2012). Europeans and their languages [online]. Special
Eurobarometer 386. Directorate-General for Communication. [29-03-2016]. Available at
WWW: < URL: http://ec.europa.eu/public_opinion/archives/ebs/ebs_ 386_en.pdf >
Egger, P. e Lassmann, A. (2012). The language effect in international trade: A meta-
analysis, Economic Letters 116, 221-224.
Eurostat (2015). News release, 164/2015 [online]. Eurostat Press Office. [25/03/2016].
Available at \WWW: < URL:
http://ec.europa.eu/eurostat/documents/2995521/7008563/3- 24092015-AP-EN.pdf >
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.30-40
Verbal communication: an essential factor in international trade
Sandra Ribeiro; Maria João Ferro
40
Ferro, M.J. and Costa, R. (2016). The economic value of language (Ch. 10). In O. Gomes
& H. F. Martins (Eds.). Advances in applied business research: The L.A.B.S. Initiative.
New York: Nova Publishers. ISBN: 978-1-63484-957-9.
Ferro, M. J. and Ribeiro, S. (2016). The role of language in international trade: How does
language affect the choice of foreign trading partners? In. S. N. de Jesus & P. Pinto (Eds.).
Proceedings of the International Congress on Interdisciplinarity in Social and Human
Sciences (pp. 608-621). Universidade do Algarve, Faro, 5-6 May 2016.
Ginsburgh, V. and Weber, S. (2018) The Economics of Language, ECARES working paper
2018-18
Helpman, E. and Krugman, R. (1985). Market structure and foreign trade: Increasing
returns, imperfect competition, and the international economy. Cambridge, MA &
London: The MIT Press. ISBN: 9780262081504.
Helliwell, F. (2000). How much do national borders matter? Washington: Brookings
Institution. ISBN 0-8157-3554-5.
Kalirajan, K. (1999). Stochastic varying coefficients gravity model: An application in trade
analysis. Journal of Applied Statistics, 26:2 185-193.
Krisztin, T. and Fisher, M. (2014). The gravity model for international trade: Specification
and estimation issues in the prevalence of zero flows. Working Papers in Regional
Science, 2014/01. WU Vienna University of Economics and Business, Vienna
Lohmann, J. (2011). Do language barriers affect trade? Economics Letters, 110:2; 159-
162.
Marschak, J. (1965). The Economics of Language. Behavioral Science, 10:2; 135-140.
Melitz, J. (2008). Language and foreign trade. European Economic Review 52, 667-99.
Melitz, J. and Toubal, F. (2014). Native language, spoken language, translation and
trade. Journal of International Economics 93, 351-363.
Rahman, D (2014) The power of communication, American Economic Review 104(11):
3737–3751
Ribeiro, S. and Ferro, M. J. (2017). Em que medida a proximidade linguística influencia
as exportações portuguesas? Um estudo aplicado à União Europeia e ao
Mercosul. Debater a Europa, 16, 189-208. ISSN: 1647-6336.
Tinbergen, J. (1962). Shaping the world economy: Suggestions for an international
economic policy. New York: The Twentieth Century Fund.
Victor G. and Shlomo W. (2018). The Economics of Language. Working Papers
ECARES 2018-18, ULB; Universite Libre de Bruxelles.
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 41-59
MYTHS AND REALITIES OF THE ASYMMETRIC RELATIONSHIP: CUBA, THE
EUROPEAN UNION AND THE FAILURE OF THE COMMON POSITION
(2006-2016)
Rogelio Plácido Sánchez Levis
rogeliosl68@yahoo.com
Professor and researcher at the Institute for Higher National Studies (Instituto de Altos Estudios
Nacionales, IAEN, Ecuador). Lecturer, international analyst, former diplomat and ambassador and
expert in Negotiation and Conflict Theory
Abstract
This article aims to present some partial results of research about asymmetry in international
relations, focusing on the EU’s Common Position on Cuba and its consequences for the links
between both players. The paper examines the EU’s loss of the channels of influence, the
persistent fractures and competition between the European supranational strategy and the
national diplomacies of the Member States, and the underestimation of the contextual and
relational factors that acted in favour of Cuba.
Keywords
Cuba, Europe, asymmetry, conflict, negotiation
How to cite this article
Levis, Rogelio Plácido Sánchez (2020). "Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the Common Position (2006-2016)". JANUS.NET
e-journal of International Relations, Vol. 11, N.º 1, May-October 2020. Consulted [online] on
the date of the last visit, https://doi.org/10.26619/1647-7251.11.1.4
Article received on July 5, 2019 and accepted for publication on February 28, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
42
MYTHS AND REALITIES OF THE ASYMMETRIC RELATIONSHIP: CUBA, THE
EUROPEAN UNION AND THE FAILURE OF THE COMMON POSITION
(2006-2016)
Rogelio Plácido Sánchez Levis
Introduction
The European Union aims to become a global actor with shared responsibilities among
its members in fields such as Common Foreign and Security Policy (CFSP), perceived as
a supranational level of additional authority (Wessels, 2013), as a way to manage the
growing challenges to national governance (Bulmer, 1995), and as a response to the
need for affirmation and global intervention (Sánchez, 1995). However, the Treaty on
European Union (TEU) was insufficient for the purposes of a true supranational and
federalist integration regarding the CFSP (Perera, 2017), which has had an impact on the
effectiveness of the “common strategies”.
The adoption of the Common Position on Cuba (CPC) was preceded by unsuccessful
attempts to sign a framework cooperation agreement with Cuba on the basis of conditions
associated with the organization of its political system (Roy & Domínguez Rivera, 2001),
the shooting down of two civil aircraft of Cuba’s anti-aircraft defence (Foont, 2007), the
report of the visit of the European Commissioner ruling out the existence of minimum
conditions for negotiation (IRELA, 1996), and the campaign commitments of the Spanish
Prime Minister, José María Aznar, to toughen the politics, demands and pressures on
Cuba. In December 1996, the Spanish government fostered the EU’s adoption of the
Common Position on Cuba (CPC), which is the subject of this paper.
William Zartman's “structuralist research dilemma” offered an adequate theoretical
perspective to understand asymmetric negotiations and relationships. From this
viewpoint, one of the areas of the asymmetric relationship in Cuba's foreign policy was
addressed: ties with Europe, specifically the phenomenon of the CPC. This article
analyses the factors that limited the results and led to the failure of the CPC as a model
for managing European global foreign policy towards Cuba.
The problem addressed here has been little studied and rather neglected in more general
analyses of the CPC. Approaches have been found to the question of the asymmetric
relations both in Cuba and in the EU, but they have focused on higher priority aspects of
their respective foreign policies. Such is the case of Zhou (2018), Criekinge (2009), and
Neuss (2011). The same applies to Whitman’s (2011) observations about the
construction of the normative hegemony of the EU, and to those of Hughes (2006) about
the asymmetric interdependence with Russia.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
43
On Cuba's asymmetric relations, there is an almost absolute predominance of studies
about its ties with the United States. López-Levy (2016) analyses the agreement to re-
establish diplomatic ties between the two nations from an asymmetric perspective. The
1962 "Missile Crisis" was examined by Jones & H. Jones (2005), and Winter (2003), from
the perspective of asymmetric perceptions of power. Domínguez (2006) studied the
penetration of China in Latin America and the disparity of expectations vis-à-vis key
actors in the region, including Cuba.
The phenomenon of the CPC, in particular, has been the object of study from different
approaches and disciplines: Perera (2017), from a historiographical perspective of the
present, while Díaz-Lezcano (2007) and Ugalde (2010), approach it as a political
phenomenon. Likewise, Gratius (2005), among other studies, examined the use of
tactical divergences between Europe and the United States.
This paper aims to answer the following question: To what extent did existing
asymmetries between the EU and Cuba influence the failure of the CPC? In addition,
three questions guided the research: how did the adoption of the CPC impact on Europe’s
work and interest in bringing Cuba closer to its system of values, principles and interests
in the political sphere? How to explain that within a relationship of an interdependent and
asymmetric nature in terms of resources, the EU's ability to influence and exert control
over Cuba has been eroded? In a totally unfavourable asymmetric relationship, how does
Cuba manage to resist the EU’s demands and impose its preferences (the CPC was
eliminated without internal political changes, and a Cuba-EU agreement was signed with
a commitment to non-interference) in the relationship and the negotiation with the EU?
This analysis starts from the assumption that the use of sovereign and nationalist
attitudes in the face of the hegemonic “dissuasive” approach that the CPC embodied,
contributed to reinforcing the asymmetric profile of the relationship between Cuba and
the EU. This eroded the relative advantages that give the EU its material capacities to
exert influence, while Cuba maintained in its favour channels and relationship and context
factors that allowed it to achieve results closer to its interests and expectations (repeal
of the CPC, preservation of its sovereign attributes, and resumption of official cooperation
without conditions).
The paper is based on empirical research of a documentary nature about the asymmetry
phenomenon in international relations applied to the CPC. It uses both qualitative and
quantitative data extracted from direct oral sources and official texts and statements.
Indirect sources such as editorials, articles published in specialized journals, and opinions
of renowned experts were also used. Interviews were used, as well as other data
collection techniques. The time frame of the study coincides with the period in which the
CPC arose and remained in force (1996-2016).
We start with Kelley and Thibaut's (1978) interdependence as a general theory of social
interaction, and William Zartman's “structuralist dilemma” of negotiation with the aim of
guiding research towards symmetry in international relations. The second theoretical
entry corresponds to the contextual and relational analysis of power in negotiation,
complemented by the expanded perspective of Criekinge (2009), Schelling’s conflict
strategy (1964) and the agency theory of Druckman (2008), Banks (1995), Jensen &
Meckling (1976), and Watts & Zimmerman (1983).
The understanding of “power as a perceived relationship” has Zartman & Rubin (2005)
among its main advocates, with their empirical research on how the weakest succeed in
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
44
asymmetric negotiations, and their theoretical reconceptualization of the notion of power.
Zartman (1997) proposes a less traditional and more refined approach to capabilities and
their influence on the negotiation process and results as a “social gathering”. For Zartman
(1997, 2005), perception is not immutable, insofar as one of the parties can count on
the ability to change the perception of the other.
The discourses and the global and regional platforms for multilateral action and
cooperation built by the “weak” actor, in this case, could respond to the Bartos and
Wehr’s (2002) criteria, which suggests that they make it generate solidarity to handle
the asymmetric conflict, and stand in the area of "best alternative to a non-agreement",
reflected in the perspective of Fisher and Ury (1981).
The use of Zartman's notions led to including Criekinge (2009) in the analysis, given the
need to take into account contextual and relational factors. This author brings together
the multiple approaches from international relations to the question of power into five
categories: "force/possession", "relational-contextual", "perception", "agenda setting",
and "constructivist vision". Unlike this author, our classification is much simpler by
identifying the "classical structuralist" notion of the analysis of power that considers that
the process and the results of the negotiation are determined by the way the material
capacities are distributed; and the rationalist stance of those who view it as a relational
phenomenon that encompasses far more than the parties' available resources, including
ideology and organization (Michels, 1962), a perceived relationship (Zartman & Rubin,
2005), mobilization ability (Bartos & Wehr, 2002), and reputation (Schelling, 1964).
The way the actors formulate preferences, strategies and mutual demands regarding the
other constitutes a crucial element to take into account when analysing the successes
and failures in asymmetric power (Criekinge, 2009: 17). Persuaded by this author's
argument, which indicates that the superiority of power in the traditional sense should
not only be held but also perceived (p.18), this articles also includes Schelling's (1964)
theoretical reflection on the credibility of "threats" and "rewards" within a conflict
relationship. Druckman's (2008) analysis and definition of “degree of agency” provided
us with an additional edge to address the limitations of the Common Position as a tool
for EU foreign policy action. For Druckman, the problem begins when individual priorities
differ from the agency's preferences, the negotiator has to decide which option to adopt,
and his sense of obligation is reflected in his willingness to abandon his own vision in
favour of the group's (Druckman, 2008: 144). Within the perspective of agency theory,
Banks' reflections (1995) address the role of agents that emerge with comparative
advantages and better information compared to those represented. Watts &
Zimmerman's (1983) approach paved the way to understanding the “opportunistic
attitudes” the parties tend to defend and to maximize their own interests to the detriment
of the collective agreement. For Jensen & Meckling (1976), if all parties to the deal are
focused on maximizing their gains, the agent will not always act for the benefit of the
main one (Jensen & Meckling, 1976).
In addition to the introduction, the discussion of the results and the conclusions, this
article presents the partial results of the research, divided into three sections: the
consequences of the breakdown of the dialogue, the loss of comparative advantages, and
the EU’s perceptual errors.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
45
Presentation of the results
1. From ascending interdependence to estrangement (1996-2003): mistrust,
tension and disagreements
The EU’s hegemonic demands and approaches, and their rejection by Havana, deepened
mutual asymmetric perceptions, not only in terms of their material dimensions, but also
in the purposes and intentions of one party against the other. What had been until then
a promising relationship - although not without complexities - was replaced by distancing,
tension, non-dialogue and mistrust.
The CPC text openly expressed the intention to foster political change in Cuba, through
the demand for "respect for human rights and real progress towards multi-party
democracy". The Cuban government was ruled out as the recipient of humanitarian aid,
proposing its channelling through “non-governmental organizations, churches and
international organizations (…)” (Official Journal, 1996). Cuba’s authorities, for their part,
rejected the European measures, calling them "unilateral, discriminatory and interfering”
(MINREX, 1996). The Cuban leadership was blunt in the face of European positions,
particularly Spanish ones. It refused the ambassador proposed by the Aznar government
(Vicent, 1996) and condemned the complicity of the European legations with the
subversive activity of the American diplomatic representation in Havana. (Ramonet,
2006: 239). The codification of the US government's measures and sanctions against
Cuba in the Helms-Burton Act further debilitated the already complicated relations
between Havana and Washington. Its third and fourth chapters were aimed at
discouraging investments by third countries in Cuba’s economy, hit by the loss of the
bulk of its external exchanges after the collapse of the USSR and the disappearance of
East-European socialist nations. In this context, the EU adopted Regulation 2271/96
"Protection against the effects of extra-territorial application of legislation adopted by a
third country" (22 November 1996).
1
However, the measure was never applied due to
the Memorandum of Understanding on the Helms-Burton Act (11 April 1997), according
to which the EU agreed to strengthen the sanctions against expropriations and
investments made in such assets and present a common proposal with the United States
under the Multilateral Investment Agreement (MIA).
2
President Fidel Castro and the head
of Cuba’s Parliament, Ricardo Alarcón, forcefully rejected the commitments (Vicent,
1998), which, according to them, not only affected Cuban but also European interests.
Two events had a notable impact on the Cuba-EU relations: the visit of the Supreme
Pontiff John Paul II (Egurbide, 1996), and the acceptance by the ACP-EU Joint Assembly,
and the Council of Ministers of the Association of Asian States, Caribbean and Pacific
(ACP) of the integration of Cuba, first as an observer, in the Lomé Convention. This group
of nations supported “full membership and eventual participation in post-Lomé IV
negotiations (CARICOM, 1998). The possibility of Cuba’s accession to this Convention put
the EU at a relative disadvantage, insofar as its position became a minority compared to
that of 71 countries that supported Cuba without any type of political conditions. The
1
With this regulation, Brussels consolidated a legal framework of protection against the extraterritorial
measures of the United States.
2
This included two aspects that would limit future investments in Cuba: investments in illegal or
discriminatory expropriated assets –in allusion to Cuba– will be discouraged, through public campaigns and
denial of government support in the form of loans or insurance; lists of claims for expropriated property will
be made and turned public.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
46
process created fissures within the EU: on the one hand, countries like France were more
prone to the inclusion of Cuba in the Lomé process (Josselin, 1998), while others, such
as Spain, defended the maintenance of the bilateral canal (IRELA, 1996).
Within the EU, a certain erosion of support of Brussels’ conditioning and sanctioning
position emerged. The Italian government sent its Foreign Minister Lamberto Dini with a
message of interest in the development of Cuba and in promoting economic and political
cooperation (Vicent, 1998a), while the Commonwealth Development Corporation of the
United Kingdom provided financing to Cuba amounting to 33 million dollars, in order to
reactivate Cuban economy (Dolan, 1998). Thus, the differentiation between national and
supranational behaviours and positions shaped Cuba’s strategy, which tended to
stimulate, differentiate and use them in its favour. The arrests of dissidents in the spring
of 2003 placed Cuban-European ties in a new crisis. The presidency, the General Affairs
Council of the EU, and the European Parliament condemned the events (European
Parliament, 2003), while the Cuban Foreign Ministry rejected such positions (MINREX,
1996). The adoption in 2003 of several additional initiatives known as "diplomatic
sanctions" led Havana to respond with similar actions, including the "rejection of any
assistance or humanitarian aid that the Commission and the governments of the
European Union may offer", with the exception of aid coming from "regional or local
autonomous regions, from Non-Governmental Organizations and solidarity movements,
which do not impose political conditions on Cuba” (Castro, 2003).
The absence of dialogue between the two parties generated disparity in terms of benefits
and results. While the EU saw its access to Cuban decision-makers and its influence on
the social sectors of its interest limited, Havana maintained and opened, as much as
possible, channels of dialogue with authorities of the member states, parliaments,
political parties, decentralized autonomous governments, and civil society organizations.
The country seemed to have alternatives to the non-negotiated agreement (Fisher &
William Ury, 1981), ensuring that, in the same period, foreign aid maintained a positive
cumulative growth rate (Pérez, 2014). Meanwhile, Brussels faced increasing pressure
from political, social and opinion sectors that did not skimp on their criticism about the
absence of results of a policy of poor results that did not respond to their expectations
and interests (Almont, 2005; Lemoine, 2010; Press, 2010; Stephens, 2014; Smith,
2011).
At the same time, Cuba drew red lines regarding any dialogue or understanding with the
EU, insisting that the "sovereignty and dignity of a people are not discussed with anyone"
(Castro F., 2003). Castro (2003) stressed that the EU lacked "enough freedom to
dialogue with full independence", while showing his interest in rewarding attitudes that
were autonomous and unmarked of the hegemonic vision of the US, emphasizing that
the creation of the EU "was the only smart and useful thing to do to counterweight the
hegemony of its powerful military ally and economic competitor”. Punishment as a way
of influencing Cuban decision-makers was rejected by the Cuban leader, when he
declared that Cuba "does not obey masters, accept threats, ask for alms, nor does it lack
the courage to tell the truth" (Castro, 2003).
In addition to the indefinite postponement of the decision on Cuba’s candidacy to Cotonou
(Ortiz, 2016), the European diplomatic sanctions did not go beyond the limitation of high-
level government visits, the reduction of the presence of the Member States in cultural
events, the invitation of Cuban dissidents to national holidays, and the re-assessment of
the CPC (MINREX, 2003). Far from serving the European objectives, these decisions
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
47
rather helped Cuba to reaffirm its sovereignty discourse in the face of more strategic
challenges, such as the conflict with Washington, to get rid of additional pressures that
did little to its international performance, and to outline its strategies of differentiation
and reward against actors not adhering to the idea of interference and imposition of
conditions. This stance had very favourable results for Cuba, so much so that trade
relations, investments and decentralized cooperation were maintained with Europe
(Bayo, 2004), although it should be noted that the weight of this continent, in Cuba’s
global exchanges, tended to decrease in favour of countries such as China and
Venezuela.
3
In the context of "non-dialogue", and unlike the EU, which saw the bulk of possibilities
to exert influence over Cuban decision-makers and access to various sectors of the
island's society closed, the structural limitations of the European construction process
(Perera, 2017) and the place of the CPC in the agenda of internal political disputes in
Spain and in the intransigent positions of the ex-socialist nations, seemed to shape, as
Criekinge suggests, the Cuban strategy. This strategy consisted, essentially, in focusing
on States - with emphasis on those with the greatest relative influence - to stimulate
dissent regarding the supranational position, offering rewards aligned with their national
interests. For President Castro, the European policy towards Cuba was hijacked by the
said political groups, and Aznar’s, "thoughts and relations with the Miami mafia"
(Ramonet, 2006).
In 2005, the situation began to ease up, at least partially, with steps taken by both sides,
such as the temporary suspension of EU diplomatic measures at the request of the
governments of Luxembourg, Spain and Belgium and the EU Commissioner for
Development and Humanitarian Aid, Louis Michel (Xalma, 2008); the reestablishment of
the Cuban Government’s official contacts with the embassies of EU countries; and the
Cuban Foreign Minister's tour of various European countries (Ugalde, 2010). The official
visits of high European government authorities to Cuba, with the CPC in full force,
demonstrated that this policy was fractured and had lost the support of the same actors
who had previously defended it. After a time of unsuccessful enforcement, they had
realised that it no longer aligned with their interests.
2. The erosion of the relative advantages of the EU in the asymmetric
relationship with Cuba: the uselessness of the influence and control tools
Faced with the impossibility to build its hegemony through force, Europe usesd "soft
power" to attract and influence the world (Nye & Ikenberry, 2004; Tuomioja, 2009;
Ibáñez, 2011; Aspíroz 2015). The destruction of the alliance with the Soviet Union, the
intensification of the US sanctions and Cuba’s deep economic crisis offered the EU an
unprecedented terrain to position itself in the country, taking advantage of its North
American competitors and gaining presence in a key and influential country in the Latin
American and Caribbean political context. Starting in 1993, the EU's policy towards Cuba
showed symptoms of change, with activity in two leading areas of the European
Commission increasing: cooperation, through the development of specific actions, and
humanitarian aid, through a flow of resources that progressively increased in subsequent
years (Perera, 2017). Brussels created and expanded a base of influence over the Cuban
3
For additional information, including statistical data, see Xalma’s article (2008) in
https://eulacfoundation.org/es/system/files/Europa%20frente%20a%20Cuba.pdf
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
48
authorities and society, supported on the one hand by its position of deterrent hegemony
- clearly differentiated from Washington's coercion and hostility – and, on the other, by
instruments associated with "soft power" aiming at aligning Cuba with its options. This
resulted in a scenario of clear imbalance in favour of the EU, insofar as it not only had
resources and capacities, but also the means of attraction and influence.
The EC, in an official communication sent to the Council and Parliament, expressed its
objective of promoting and achieving a peaceful transition in Cuba, recognizing the need
to strengthen ties with the country, as well as the influence and leadership capacities
that the EU could play in that context. It also detailed and praised the economic reforms
that served European interests, pointing out the existence of reformist sectors within
Cuba’s political and state leadership (Commission of the European Communities, pp. 2-
3).
The environment for the EU’s influence actions in the country began to thin out in 1996
with the adoption of the CPC, until it reached its most complex moment, caused by the
2003 "diplomatic sanctions" and Havana’s rejection of official cooperation programmes.
It can be deduced from the CPC text (Official Journal, 1996) that the EU assumed that
given Cuba’s marked vulnerability and fragility, its superiority in terms of material
capacities and resources, together with punishments and rewards, would allow aligning
Cuba with its positions relatively easily.
EU pressure reinforced the asymmetric perception between the parties in terms of
purposes, pushing away the possibilities for dialogue and compromise. The European
demands were perceived by the authorities in Havana as an extension of the legitimacy
base of the United States' zero-sum line, considering that Europe shared with the United
States "extraterritorial laws which, by violating the sovereignty of their own territories,
increase the blockade against Cuba (…)” (Castro F., 2008). Faced with this situation,
Havana decided to close the channels of influence contained in the EU's official
cooperation policy and programmes, while leaving open exchanges with other actors that
did not require any conditions (Castro F. , 2003; MINREX, 2003).
This led to a situation of asymmetry, in which the "strong" actor saw its influence and
control instruments rendered useless, while the "weak" actor, supported by the
institutional weaknesses of its adversary, demonstrated its ability to gain followers, divide
and erode the opponent's stance. Thus, the Cuban strategy for managing the CPC
seemed to take shape in the face of the confrontation of the two institutional processes
that have marked the history of the EU: on one side, the supranational or communal, on
the other, the intergovernmental. At the same time, Havana seemed to use one of the
programmatic foundations of its foreign policy: the identification and use of fissures and
struggles of "inter-imperialist" interests (Rodríguez, 1980).
Cuban diplomacy realised that it could take advantage of the dissent that was gradually
felt up by member states that had more constructive positions and greater interest in
relations with Cuba (Gratius, 2005; Perera, 2017; Ugalde, 2010), which ended up
generating contradictions, undermining and delegitimizing the EU’s supranational
interference. This will be expanded in the third section of this article.
By dismissing, denigrating and disqualifying the promise of rewards made my Europe,
Havana left its adversary devoid of sufficient instruments of attraction to achieve its
purposes. Its strategy seemed to be based on Europe's limitations in exercising its "soft
power" in a consistent and productive way and the possibility of conducting, without
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
49
significant restrictions, influencing actions within the EU. In the words of Cuba’s former
ambassador to Spain: […] they were wrong in the move, because we were able to do
what they could not do. We could limit their relationships. […] up to a point (Allende
Karam 2015, quoted in Perera, 2017, : 152). In turn, Cuban diplomat Ángel Dalmau
affirmed that the embassies of his country “were able to work in the terms more or less
in which a Cuban embassy works in Europe” (Dalmau, 2015, quoted in Perera, 2017:
153).
The debate has also been raised about the contextual elements that acted in favour of
Cuba’s negotiating capacity and political action. Perera (2017) points towards the full and
definitive reintegration of Cuba in its regional environment, favoured by the political
changes in the region
4
, the flexibility of the Obama administration vis-à-vis Havana, the
progressive resumption of bilateral cooperation with different member states unilaterally
suspended by the Cuban government in July 2003, and the release of those arrested
during the events of March 2003 (pp. 184-185). Ugalde (2010), Alzugaray (2009) and
Hernández (2009) emphasise the consequences of the transfer of command to Raúl
Castro, the impacts of a more pragmatic discourse, the economic reforms undertaken,
and the changes in the international scenario. Drouhaud (2016) and Terranova (2015),
give more weight to the results of Cuba’s foreign policy and its alliances with emerging
powers such as China and Russia.
3. The EU and failed perceptions, calculations and strategies: agency problem
This empirical approach to the CPC identified two issues that contributed to displacing
the asymmetry in favour of Cuba and its preferences, in particular those associated with
the preservation of its sovereign attributes, the weakening of the interventionist line
contained in the European strategy, and maintaining channels of influence with European
institutions and governments: the role of the EC’s agency (Druckman, 2008; Jensen &
Meckling, 1976; Banks, 1995; Watts & Zimmerman, 1983), on the one hand, and the
credibility of its promises of rewards and punishments (Schelling, 1964).
The EC had a complex agency role to play, having to carry out the formal mandates
conferred by the decisions taken within the Council of Ministers and the Parliament and
deal with the demands and pressures of some Member States which, although part of
the Council agreements, at the level of their respective diplomacies guided their action
more towards the defence and promotion of their national interests than to the needs of
supranational policy. The above coincides with Gartius’ (2005) views, who considers that
in the EU - the Commission, the European Parliament and the 25 member states - there
was no policy but a great diversity of policies towards Cuba, ranging from unconditional
commitment to political and economic distancing (6).
After the adoption of the CPC, Spain, paradoxically, was the first country to breach it by
maintaining bilateral cooperation in various areas, consolidating itself as a provider of
goods, becoming the second investor in Cuba’s economy, and admitting the participation
of President Fidel Castro in the Ibero-American Summits, the ninth edition of which took
place in Havana. Likewise, a group of countries like France, Belgium and Portugal were
4
It includes the admission to the Rio Group, a founding member of the Community of Latin American and
Caribbean States, those asked to join the OAS and the Inter-American System (Perera, 2017)
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
50
favourable to compromise, which attests the prevalence of national interests over the
supranational strategy (Gratius, 2005: 6). It should be noted that not all Member States
truly complied with the sanctions. The Belgian diplomatic representation in Havana, for
example, used formulas that allowed it, without radically breaching the European
commitment, to make visible that its legation was accredited to the Cuban government,
whose officials continued to attend their official activities. This had its compensation in
that the cooperation with Belgium was not suspended (Perera, 2017 :51).
In France, there was dissatisfaction regarding the null results of the CPC and the
obstacles it imposed on attaining national objectives. President Jacques Chirac pointed
out that the initiative blocked the "immense potential of relations between the two
countries" (Chirac, 2005). In turn, the member of parliament and president of the France-
Cuba Parliamentary Friendship Group, Alfred Almont, declared his intention to
communicate to the French head of state his idea of "proposing the repeal of the Common
Position towards Cuba" (Almont, 2005). Likewise, the president of the Pernod Ricard
business group, Patrick Ricard, spoke in favour of the elimination of all the pitfalls
affecting the Franco-Cuban relationship (Ricard, 2005).
Unlike the Cuban-American conflict, the dispute between Havana and Brussels did not
pose an existential threat Cuba, considering the nature of the "soft power" exercised by
Europe, based on attraction rather than coercion. Hence, Cuba took precautions not to
weaken its negotiating power in the main dispute, insisting on "a respectful dialogue,
among equals, on any matter, without prejudice to our independence, sovereignty and
self-determination" (Castro R., 2009). He also stated "Cuba's will to maintain a respectful
relationship, which necessarily happens because the EU recognizes and treats Cuba on
equal terms" (MINREX-Cuba official statement, quoted in Reuters, 2010).
The EU seemed to ignore that with greater influence, the punishments and promises of
the United States had not achieved any significant movement on the part of Cuba. It
could also have underestimated the influence of national interests in defining the
individual behaviours of member countries that from the beginning violated the wording
and purposes of the CPC (Gratius, 2005). Trade relations, investments, and tourism were
maintained despite the sanctions, which tended to be more symbolic than real.
5
The European position weakened before the range of alternatives that Cuba had in the
event that the relationship was not normalized and an agreement reached. These
included links with governments and decentralized actors in the EU itself. Cuba’s former
ambassador to Spain recalled that they could not “limit entry at the level of autonomy,
even with people from the PP at the head of their governments (Allende Karam, 2015
quoted in Perera, 2017,: 152). A similar situation was found in France, where Cuban
diplomats had access and built agreements and initiatives with regional and
departmental entities and municipalities (Sánchez-Levis, 2005). According to World Bank
data, the net official development aid received by Cuba maintained its upward trend. In
5
Europe is the main investor in Cuba, with 71% of the total, with Spain, France, the United Kingdom and
Germany being the most representative countries (Fonseca, 2017). From 1995 to 2017, Cuba's total
exchange of goods and services with the exterior tripled, with an increase of 4448 million CUP
5
to 12574
CUP, while trade relations between Cuba and the EU were maintained between 2012 and 2017, oscillating
between 4233 million CUP and 3624 million CUP, which means a weight of more than 20% in the island's
external exchanges (ONEI-Cuba, 2018). We agree with Díaz-Lezcano (2007) in the sense that "the
commercial variable does not depend directly on the political springs that mobilize the bilateral dynamics"
Diaz-Lescano, 2007. For their part, European countries remained among the top markets for Cuba ONEI-
Cuba, 2018.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
51
the year the CPC was adopted, it amounted to USD 57 million
6
, in 2004 to USD 99 million,
reaching the record of USD 2,678 million in 2016 (World Bank, 2017).
With the provisional suspension of the "diplomatic sanctions" against Havana (European
Union, 2005), and its subsequent definitive elimination in 2008, the EU seemed to be
trying to recover from a situation of symmetry in which it could resume its contacts,
access and influence on the Cuban authorities, through dialogue and cooperation
programmes. Cuba, for its part, insisted on the repeal of the CPC as a sine qua non
condition for the resumption of negotiations, emphasizing that it was not "enough to
remove the sanctions" (Pérez Roque, 2008), and stating that the "discredited form of
suspending the sanctions against Cuba that the European Union just adopted on 19 June
had no economic effect on the economy of the blocked country (...)" (Castro F., 2008).
After two decades of unsuccessful application of the CPC, the European authorities ended
up aligning with the Cuban position that demanded its immediate repeal, respect for
sovereignty, and the resumption of cooperation without any conditions. In the text of the
“Agreement for political dialogue and cooperation”, “the respect for the sovereignty,
territorial integrity and political independence of the Republic of Cuba” was reaffirmed
(…) “as well as the adherence of the Parties to all the principles and purposes stated in
the Charter of the United Nations (Council of the European Union, 2016)”.
Results and discusion
The failure of the CPC is related to phenomena such as resource distribution, context,
and relationship. This empirical study so far notes a strong incidence of the second and
third categories on the object of study. However, in the case of the first, a much finer
analysis is still required, considering that the research at the beginning tended to
overemphasize the disparity of resources between the parties, and only later expand this
approach with the introduction of theoretical insights about the "agency problem" and
the "conflict strategy". The aforementioned theoretical perspectives place us, in turn, in
another area of reflection that must determine if the CPC responded more to legitimate
European interests, if it was a currency in transatlantic negotiations - which combined
harsh rhetoric, symbolic sanctions and pragmatism of the European national diplomacies
- or if it resulted from the combined influence of both. As the “strongest” strategy, the
CPC leads us to the principle that capacities and resources do not always determine the
outcome of a negotiation, although their better distribution and use could have improved
their efficiency, under specific conditions. To what extent will it be feasible to continue
considering the CPC as a classic case of “structuralist dilemma”, when it failed to
concentrate the bulk of European resources in the same direction? Even so, the failure
of the CPC as an instrument of pressure on Cuba allowed verifying the validity of
Zartman's theses that open the possibility that the disparity in terms of resources and
capacities does not always determine the relationship process and the results of
negotiations between the parties.
The use of conditions by the “strongest” over the “weakest” tended to erode, as Zartman
and Rubin indicate, the minimum conditions for a relationship-negotiation with
acceptable results for the parties involved. Instead of improving the conditions of
influence and control over Cuba’s decision-makers, they were reduced to a minimum,
6
US dollars
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
52
after the closure of official communication channels and Cuba’s rejection of the EC's
conditional cooperation (rewards). At the same time, the perceptions of the European
strategists on the relative advantages of aligning Havana with their positions, on the
vulnerabilities and insufficiencies of Cuba's capacities, and the power difference between
the parties, constituted the bases of the miscalculation, which led them to underestimate
and not adequately consider the weight of the relational and contextual factors defined
by Zartman, Zartman & Rubin, and Criekinge. The analysis of the approaches of these
authors allowed us to identify the elements of the context and the relationship that Cuba
used in its favour.
Incorporating Banks, Druckman, Jensen and Zimmerman's insights about "agency"
further opened up our analysis and rethink the question of material capacities, whose
dimensions are not always the most influential. However, how they are organized,
arranged and used are. This study confirms that the EU’s resources and capacities were
unfocused, reducing the strength and credibility of the supranational strategy. While
Brussels pressed and placed demands on Havana, some of the member states used
strategies of their own national diplomacies, with dialogue, cooperation and ties, without
conditions.
Likewise, the reflections derived from the application of the agency theory made us return
to the general principles of interdependence theory (IT), considering that at some point
in the research, the problem of the disparity of capacities was relegated to second place
- with the questioning of its influence on the process and its results - becoming evident
the adaptability of IT for the analysis of a process that includes structure, transformation,
interaction, and the adaptation of the players. This allows us to affirm that the abysmal
disparity and its pressure on the “smallest” actor were more apparent than real, given
that trade, investment, tourism and official cooperation were maintained. It could have
been different if the aforementioned links had been conditioned to changes in Cuba’s
behaviour.
Schelling's conflict theory deserves a similar analysis. Promises of punishments and
rewards hardly work in a context of seeming asymmetry, where the most resourceful
player does not have effective means to co-opt and align its opponent. In this case,
neither the offer to negotiate and sign a framework agreement for bilateral cooperation,
nor the threat of reducing diplomatic contacts, achieved the expected results. Everything
indicates that the strong bilateral interdependence (trade, tourism, investment,
governmental and non-governmental cooperation), as well as elements of the context
and of the relationship itself, contributed to relativizing the e superiority of EU's power
vis-à-vis Cuba.
Conclusions
The adoption of the CPC and the subsequent application of diplomatic sanctions produced
results contrary to those the EU expected. Cuba’s perception that this broadened the
legitimacy base of the Washington zero-sum line against it, closed the EU’s possibilities
and channels of influence over the Cuban authorities and society. With the
aforementioned initiative, the confrontation between the European hegemonic approach
- more persuasive than coercive - and the sovereign-nationalist on the Cuban side, was
opened. In this context, the asymmetry is deepened not only in terms of resources but
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
53
also of purposes and intentions, which manages to annul the minimum conditions for the
relaunch and development of the bilateral dialogue.
The disparity of opportunities for influence disadvantaged the European authorities, given
the closure of access to their representations in Cuba, while the diplomatic legations of
Havana maintained their influence in more or less normal conditions in the different
European capitals. The CPC was disrespected from the beginning by some of the member
states and, over time, dissents and fractures were created in this supranational strategy
that began to compete with the bilateral policies conducted by the different capitals,
without conditions.
Europe’s perception regarding its superiority of power vis-à-vis Cuba, its vulnerabilities,
and the favourable different capacities made it make erroneous strategic calculations,
which underestimated the effects of relational factors, such as Havana's veto capacity
over its initiatives and actions of influence, the limited effects of its rewards and
punishments, the weight of mutual interdependencies, etc. It also miscalculated the
context factors, such as Cuba’s insertion in the Latin American and Caribbean regional
sphere, its upward relations with the emerging powers, and the change in policy of the
administration of President Barack Obama, among others.
This study shows that in the absence of sufficiently convincing punishments and rewards,
the weak actor has a margin of manoeuvre that it actively uses to resist and even move
its adversary towards its options and preferences. The empirical evidence of this work
indicates that the player with the least relative power needs certain premises to create
value in conditions of asymmetry, without having to engage in a risky negotiation
process: (1) absence of existential threats, (2) the global value of the benefits must
exceed that of the costs, (3) the alternative to a non-agreement must be viable, (4)
realizing that the punishments promised by the “strong” actor are inapplicable or
ineffective, and (5) the "no dialogue" stance is much more beneficial than that of
accepting the rewards that the adversary has promised.
References
Almont, A. (2005). Declaraciones del diputado Alfred Almont durante la visita de cortesía
del Embajador de Cuba. Paris: Author's Notes.
Alzugaray, C. (2009). Los cambios en la agenda regional hemisférica ante los nuevos
escenarios. Pensamiento Propio, No. 30, 69-85. Retrieved on 2 May 2019, from
www.cries.org/contenidos/30.pdf
Amin, S. (2001). Capitalismo, imperialismo, mundialización. Resistencias Mundiales, 15-
29. Retrieved from
http://bibliotecavirtual.clacso.org.ar/clacso/se/20100726091549/2amin.pdf
Aspíroz, M. L. (2015). Soft Power and Public Diplomacy: The Case of the European Union
in Brazil. Los Angeles: Figueroa Press .
Balliet, D., & Van Lange, P. (2015). Interdependency Theory. In M. M. Shaver, APA
Handbook of Personality and Social Psychology (págs. 65-92). Washington: American
Psychological Association.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
54
Banco Mundial, I. (2017). Ayuda oficial neta para el desarrollo recibida (US$ a precios
actuales). Washington: World Bank. Retrieved from
https://datos.bancomundial.org/indicador/DT.ODA.ODAT.CD?locations=CU
Banks, J. (1995). The design of institutions: an agency theory perspective. In D. Weimer,
& C. Lingnan , Institutional Design (págs. 17-37). New York: Springer Science. Retrieved
from https://link.springer.com/content/pdf/bfm%3A978-94-011-0641-2%2F1.pdf
Bartos, P., & Wehr, O. (2002). Using conflict theory. London: Cambridge University Press.
Bayo, F. (2004). Las tensiones entre Cuba y Europa con Estados Unidos de trasfondo.
Nueva Sociedad 190, 85-91. Retrieved from
https://nuso.org/media/articles/downloads/3184_1.pdf
Bulmer, S. (1995). El análisis de la Unión Europea como un sistema de gobernación .
Nueva Epoca, 85-112.
CARICOM. (1998). THE STATEMENT OF SANTO DOMINGOTHE CARIBBEAN ENCOUNTER:
TOWARDS THE 21ST CENTURY. Santo Domingo de Guzmán: CARICOM Secretariat,
Georgetown, Guyana.
Castro, F. (26 July 2003). Portal del Gobierno de Cuba. Retrieved on 29 April 2019 from
http://www.cuba.cu/gobierno/discursos/2003/esp/f260703e.html
Castro, F. (18 May 2008). Dos lobos hambrientos y una caperucita roja. Cubadebate.
Retrieved on 29 April 2019 from http://www.cubadebate.cu/reflexiones-
fidel/2008/05/18/dos-lobos-hambrientos-una-caperucita-roja/#.XPlmP_57mUk
Castro, F. (20 June 2008). Estados Unidos, Europa y los derechos humanos. Retrieved
on 1 May 2019 from Fidel Castro Soldado de las ideas:
http://www.fidelcastro.cu/es/articulos/estados-unidos-europa-y-los-derechos-humanos
Castro, R. (20 December 2009). CubaMinrex. Retrieved on 30 April 2019 from
CubaMinrex:
http://anterior.cubaminrex.cu/DiscursosIntervenciones/Articulos/Raul/2009/2009-12-
20.html
Chirac, J. (2005). Comentarios en la presentación de las cartas credenciales del
Embajador de Cuba. Paris: Author’s notes.
Commission of the European Communities, C. o. (1995). Communication from the
Commission to the Council and the European Parliament. Brussels: Commission of the
European Communities. Retrieved on 27 April 2019 from
http://aei.pitt.edu/2830/1/2830.pdf
Comunidades Europeas, C. (1997). Treaty of Amsterdam amending the Treaty on the
European Union, the Treaties establishing the European Communities, and Certain
Related Acts. Treaty of Amsterdam (:148). Amsterdam: Office for Official Publications of
the European Communities, 1997.
Consejo de la Unión Europea, C. d. (2016). Acuerdo de diálogo político y de cooperación
entre la Unión Europea y sus Estados miembros, por un lado, y la República de Cuba, por
otro. Brussels: EU Council. Retrieved on May 2019 from
http://data.consilium.europa.eu/doc/document/ST-12504-2016-INIT/es/pdf
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
55
Criekinge, T. V. (2009). Power Asymmetry between the European Union and Africa?
London: The London School of Economics and Political Science.
Díaz-Lezcano, E. (2007). Las relaciones Unión Europea-Cuba. Evolución y Perspectivas .
Clío América, 259-267.
Dolan, K. (30 November 1998). Hodson s Choice. Forbes. Retrieved on 1 May 2019 from
https://www.forbes.com/global/1998/1130/0118024a.html#1ccd8fde7aef
Domínguez, J. (2006). China Working Paper China’s Relations With Latin America:Shared
Gains, Asymmetric Hopes. Inter-American Dialogue, 1-59.
Drouhaud, P. (2016). Opiniones sobre la Posición Común de la UE. Paris: Author’s notes.
Druckman, D. (2008). Boundary Role Conflict: Negotiation as dual responsiveness.
Négociations, 131-150.
Egurbide, P. (20 November 1996). El Papa acepta la invitación de Fidel Castro para visitar
Cuba el próximo año. El País. Rtrieved on 2 May 2019 from
https://elpais.com/diario/1996/11/20/internacional/848444418_850215.html
European Parliament. (2003). European Parliament resolution on Cuba. Strasbourg:
European Parliament. Retrieved on 3 May 2019 from
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P6
-TA-2004-61
Fisher, R., & William Ury. (1981). Getting to yes. London: Penguin Group.
Fonseca, J. P. (2017). Proceso de apertura al capital extranjero en Cuba. Un repaso
necesario. Havana: ISRI. Retrived on 3 May 2019 from
http://www.isri.cu/sites/default/files/publicaciones/articulos/boletin_0117.pdf
Foont, B. E. (2007). Shooting down Civilian Aircraft: Is There an International Law.
Journal of Air Law nad Commerce, Volumme 72, Issue 3, 696-711. Retrived on 3 May
2019 from
https://scholar.smu.edu/cgi/viewcontent.cgi?referer=https://www.google.com.ec/&http
sredir=1&article=1147&context=jalc
Gratius, S. (2005). ¿Ayudando a Castro? Las políticas de la UE y de EEUU hacia Cuba.
Madrid: Fundación para las Relaciones Internacionales y el Diálogo Exterior.
Hernández, J. (2009). Los Estados Unidos, la política hacia Cuba y el entorno hemisférico:
procesos, contextos y perspectivas. Pensamiento Propio No.30, 181-206.
Hughes, J. (2006). EU Relations with Russia: Partnership or Asymmetric
Interdependency? London: LSE Research Online.
Ibáñez, L. (2011). El soft power de la UNión Europea: ¿Es suficiente para el papel mundial
que desea jugar? Boletín de Información, número 322, 48-66.
IRELA. (1996). Cuba and the European Union: The Difficulties of Dialogue. Hamburg:
IRELA. Retrived on 3 May 2019 from
https://eulacfoundation.org/es/organization/instituto-de-relaciones-europeo-
latinoamericanas
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
56
IRELA. (1998). El mundo se abre a Cuba. Avances hacia su plena inserción internacional.
Hamburgo: IRELA. Retrived from
https://nuso.org/media/articles/downloads/2708_1.pdf
Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial behaviour, Agency
Costs and Ownership Structure. Journal of Financial Economics, October 1976, V.3, 305-
360.
Jones, J. A., & H. Jones, V. (2005). Through the Eye of the Needle: Five Perspectives on
the Cuban Missile Crisis. Rhetoric and Public Affairs, 133-144.
Josselin, C. (1998). Déclaration de M. Charles Josselin, ministre délégué à la coopération
et à la francophonie, sur le renouvellement des accords de partenariat entre l'Union
européenne et les pays de l'ACP et sur la coopération régionale en matière économique,
politique et. Bridgetown: Vie Publique. Retrieved on 3 May 2019 from https://www.vie-
publique.fr/cdp/notices/983001437.html
Lemoine, M. (26 February 2010). Selon que vous serez cubain ou colombien…. Le Monde
Diplomatique. Retrieved from https://www.monde-diplomatique.fr/carnet/2010-02-26-
Cuba-Colombie
López-Levy, A. (2016). Cuba-US: The December 17 Agreement in the Rationale of
Asymmetric Relations. In E. Hershberg, & W. LeoGrande, A New Chapter in US-Cuba
Relations (pp. 27-40). London: Palgrave Macmillan, Cham.
Michels, R. (1962). Political Parties: A Sociological Study of the Oligarchical Tendencies
of Modern Democracy. New York: Collier Books.
MINREX. (1996). Declaraciones sobre la Posición Común de la UE. La Habana: MINREX
Cuba. Retrived from http:// europa.cubaminrex.cu/
MINREX. (11 June 2003). Portal del Gobierno de Cuba. Retrived on 29 April 2019 from
Portal del Gobierno de Cuba:
http://www.cuba.cu/gobierno/documentos/2003/ing/r110603i.html
Neuss, B. (2011). Asymmetric Interdependence. Do America and Europe Need Each
Other? ASPJ Africa & Francophonie - 2nd Quarter 2011, 48-62.
Nye, J., & Ikenberry, J. (2004). Soft Power: The Means to Success in World Politics.
Foreign Affairs January 2004, 136. Retrieved on 28 April 2019
Official Journal, O. (1996). COMMON POSITION of 2 December 1996 defined by the
Council on the basis of Article J.2 of the Treaty on European Union, on Cuba
(96/697/CFSP). Brussels: Official Journal. Retrieved on 28 April 2019 from https://eur-
lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A31996E0697
ONEI-Cuba, C. (2018). Anuario Estadístico de Cuba Sector Externo. Havana: ONEI.
Optenhögel, U. (2017). La Unión Europea como actor global. Nueva Sociedad. Retrived
from https://nuso.org/autor/uwe-optenhogel/
Ortiz, E. (2016). Unión Europea-Cuba:relación compleja, futuro incierto. Anuario Español
de Derecho Internacional, 337-371. Retrieved on 28 Abril 2019 from
https://core.ac.uk/download/pdf/147104655.pdf
Perera, E. (2017). La política de la Unión Europea hacia Cuba. Panama: Ruth Casa
Editorial.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
57
Pérez Roque, F. (2008). Comentarios sobre la eliminación de las sanciones diplomáticas
de la UE contra Cuba de 2003. Paris: Author’s notes.
Pérez, V. C. (2014). LA COOPERACIÓN INTERNACIONAL PARA EL DESARROLLO EN CUBA.
UN CASO DE ESTUDIOIUDC-UCM 1 LA COOPERACIÓN INTERNACIONAL PARA EL
DESARROLLO EN CUBA. UN CASO DE ESTUDIO. Madrid: Instituto Universitario de
Desarrollo y Cooperación IUDC-UCM. Retrieved on 23 April 2019
Press, E. (24 February 2010). Cuba.- El PSOE afirma que la muerte de Zapata "no
perjudica" que el Gobierno siga defendiendo cambiar la Posición Común. Europa Press.
Retrieved from https://www.europapress.es/nacional/noticia-cuba-psoe-afirma-muerte-
zapata-no-perjudica-gobierno-siga-defendiendo-cambiar-posicion-comun-
20100224163436.html
Ramonet, I. (2006). Cien horas con Fidel. Havana: Oficina de Publicaciones del Consejo
de Estado.
Reuters. (10 June 2010). América en economía. Cuba manifiesta disposición al diálogo
con la UE pese a roces. Retrieved on 30 April 2019, from
https://www.americaeconomia.com/politica-sociedad/politica/cuba-manifiesta-
disposicion-al-dialogo-con-la-ue-pese-roces
Ricard, P. (2005). Comentarios en la cena del Club de Parlamentarios Aficionados al
Tabaco. Paris: Author’s notes.
Rodríguez, C. R. (1980). Fundamentos estratégicos de la política exterior cubana. In C.
R. Rodríguez, En Letra con filo. Havana: Editorial Ciencias Sociales.
Rodríguez, P. (2013). Hacia la regionalización. Revista de Relaciones Internacionales de
la UNAM, núm. 115, enero-abril de 2013, pp. 129-145.
Roy, J. (2000). The “Understanding” Between the European Union and the United States
Over Investments in Cuba. Miami: ASCE. Retrieved from
https://www.ascecuba.org/asce_proceedings/the-understanding-between-the-
european-union-and-the-united-states-over-investments-in-cuba/
Roy, J., & Domínguez Rivera, R. (2001). Las relaciones exteriores de la Unión Europea.
México DF: Plaza y Valdés.
Sánchez, L. I. (1995). La UNión Europea y su Política Exterior y de Seguridad. CEPC,
773-798.
Sánchez-Levis, R. P. (2005). Informe de visitas a las entidades descentralizadas
francesas. Paris: Embassy of Cuba.
Schelling, T. (1964). Estrategia de Conflicto. Madrid: Tecnos.
Smith, D. (8 August 2011). Time to get closer to Cuba. Support the Guardian. Retrieved
from https://www.theguardian.com/commentisfree/cifamerica/2011/aug/08/cuba-uk-
relationship-agreement
Stephens, S. (2014). The EU has recognized that its Common Position has failed to
improve human rights in Cuba. It's time for the U.S. to do the same with its embargo.
Retrieved from https://www.americasquarterly.org/content/eu-has-recognized-its-
common-position-has-failed-improve-human-rights-cuba-its-time-us-do
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
58
Terranova, V. (2015). Opiniones sobre la Posición Común de la UE sobre Cuba. Paris:
Author’s notes.
Tuomioja, E. (2009). The Role of Soft Power in EU Common Foreign Policy. International
Symposium on Cultural Diplomacy. Berlin. Retrieved on 28 April 2019
Ugalde, A. (2010). La Posición Común de la Unión Europea hacia Cuba a reconsideración
(2008-2010). 9no Seminario de Relaciones Internacionales ISRI 2010. Havana: ISRI.
Retrieved on 26 April 2019 from
https://eulacfoundation.org/es/system/files/La%20Posición%20Común%20da%20la%2
0Unión%20Europea%20hacia%20Cuba.pdf
Unión Europea, C. d. (2005). Conclusiones del Consejo de la Unión Europea en torno a
las Evaluaciones Semestrales de la Posición Común sobre Cuba (junio de 1997-enero de
2005)». Brussels: Council of the European Union. Retrieved on 1 May 2019 from
http://www.miscelaneasdecuba.net/web/article.asp?artID=1455
Vicent, M. (27 November 1996). Castro responde a Aznar con la retirada del plácet al
nuevo embajador, Jose Coderch. El País. Retrieved from
https://elpais.com/diario/1996/11/27/espana/849049222_850215.html
Vicent, M. (25 May 1998). Castro advierte que ningún entendimiento entre la UE y EE
UU puede realizarse a costa de Cuba. El País. Retrieved from
https://www.cubanet.org/htdocs//CNews/y98/may98/25o2.htm
Vicent, M. (10 June 1998). Italia envía a Cuba al primer ministro de Exteriores de la UE
en diez años. Retrieved from
https://elpais.com/diario/1998/06/10/internacional/897429607_850215.html
Watts, R. L., & Zimmerman, J. (1983). Agency Problems, Auditing, and the Theory of the
Firm: Some Evidence. Journal of Law and Economics, Vol. 26, No. 3, (Oct., 1983), pp.
613-633, 613-633.
Wessels, W. (2013). The EU System: A polity in the making. Cologne: epubli GmbH.
Winter, D. (2003). Asymmetrical Perceptions of Power in Crises: A Comparison of 1914
and the Cuban Missile Crisis. Journal of Peace Research, 251-270.
Xalma, C. (2008). Europa frente a Cuba. Nueva Socieadad 216, julio-agosto 2008, 65-
76. Retrived on 26 April 2019 from
https://eulacfoundation.org/es/system/files/Europa%20frente%20a%20Cuba.pdf
Zartman, W. (1997). The Structuralist Dilemma in Negotiation. Washington: Research
Group in International Security.
Zartman, W., & Rubin, J. (2005). Power and the practice of negotiation. Michigan: The
University of Michigan Press.
Zhou, H. (2018). Symmetry and Asymmetry in China-EU Partnerships. Retrieved on 8
May 2019 from
http://ies.cass.cn/english/chinare/cer/201205/t20120515_2464149.shtml
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.41-59
Myths and realities of the asymmetric relationship:
Cuba, the European Union and the failure of the common position (2006-2016)
Rogelio Plácido Sánchez Levis
59
List of oral sources consulted
Alfred Almont, Member of Parliamente and president of the France-Cuba Parliamentary
Friendship Group
Jacques Chirac, president of the French Republic
Pascal Drouhaud, expert on Latin American issues and former secretary of International
Relations of the Union for the Popular Majority party
Patrick Ricard, president of the Pernod Ricard group
Valerie Terranova, former advisor to the Presidency of the French Republic
Oral sources obtained from other studies
Ángel Dalmau Fernández, researcher and former Vice Minister of Foreign Affairs of the
Republic of Cuba
Isabel Allende Karam, Rector of the Higher Institute of International Relations "Raúl Roa
García", former Vice Minister of Foreign Affairs of the Republic of Cuba and former
ambassador to the Kingdom of Spain
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 60-76
A HISTORICAL PERSPECTIVE OF ENTREPRENEURSHIP IN ANGOLA
Renato Pereira
rpereira@autonoma.pt
Integrated Researcher at OBSERVARE, Universidade Autónoma de Lisboa (Portugal). Associate
Professor at UAL. Invited Professor at ISCTE-IUL. Holder of Ph.D. in Management Sciences from
Université Paris Dauphine.
Abstract
This article makes a historical analysis of entrepreneurship in Angola, starting from the
historical evolution of the entrepreneurship concept to focus on the evolution of this
phenomenon in Angola, over four different historical periods. Resorting to bibliographic
sources of reference authors and their extensive analysis, it was possible to obtain a historical
perspective of entrepreneurship in Angola. The paper critically examines its evolution in the
country and provides a reflection on possible future development scenarios.
Keywords
Entrepreneurship, Angola, Africa, History
How to cite this article
Pereira, Renato (2020). "A historical perspective of entrepreneurship in Angola". JANUS.NET
e-journal of International Relations, Vol. 11, N.º 1, May-October 2020. Consulted [online] on
the date of the last visit, https://doi.org/10.26619/1647-7251.11.1.5
Article received on April 18, 2019 and accepted for publication on February 4, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
61
A HISTORICAL PERSPECTIVE OF ENTREPRENEURSHIP IN ANGOLA
Renato Pereira
1
Introduction
The historical perspective of entrepreneurship in Angola is strongly conditioned by the
combination of at least two historical circumstances: (i) a colonial period of about five
centuries marked by a preponderance of a monarchical regime; (ii) a post-colonial period
characterised by a long civil war that only ended in 2002 (Schubert, 2015).
On the other hand, entrepreneurship itself dates back to the industrial era, focusing on
Northern Europe, where private initiative had a bigger impact.
Angola is originally the result of the colonial economic model, followed by the upsurge
of this economic model with the rise of the Salazar’s Estado Novo, and, finally, by the
socialist oriented economic model implemented after the country's independence on 11
November 1975, which lasted until the fall of the Soviet Union in 1991. Subject to a “one
party” period, it only truly found its space very recently (Ovadia, 2018).
In Angola, and across generations, one senses the quest for a historical meaning that
helps to find solutions to get out of the current financial blockade that the country is
experiencing.
Never before, as now, since a lasting peace was finally achieved, the historic future has
worried Angolans so much. The sharp change in the perception of the country's real
economic capacities, and the clear reversal in the living standards’ evolution trend, has
thrown society as a whole, but also the political and ruling class, in particular, into a
situation of anguish.
Thus, History begins to be increasingly used as a kind of oracle about the uncertain future
of a country that has already experienced great challenges in several phases of its
historical process.
In addition, orality as a fundamental historical source in Africa (e.g. Henige, 2005;
Cooper, 2005) is fully confirmed by the above and by the dialogue that was subsequently
established.
1
The author expresses his deepest thanks to Professor Redento Maia, Dean of the Faculty of Economics of
the Agostinho Neto University, for the access granted, during this research, to the resources of the CISE -
Centre for Socio-Economic Research of that faculty.
The author also expresses his thanks to the two anonymous reviewers of the first version of this work,
whose comments greatly contributed to its improvement.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
62
It is therefore important to write about the history of African peoples, territories and
countries. All contributions to the clarification of the historical meaning of current African
societies are very important for the sustainability of collective solutions that they will
have to find at this moment in their historical process.
The objectives of this research are to offer a historical perspective on the path of
entrepreneurship in Angola, without forgetting its geographical character and the
historical framework of entrepreneurship itself, as a concept, as an economic reality and
as a theoretical object.
1. Historical context of entrepreneurship
1.1. The concept of entrepreneurship
According to Haahti (1989), quoted by Zinga (2007), the term entrepreneurship first
appeared in the Universal Dictionary of Commerce, published in Paris in 1723 by Jacques
de Brunslons Savary.
The same source says that the term was already current in the French vocabulary of the
12th century, associated with the idea of "carrying out an activity" and that in the 15th
century its meaning already had a legal connotation, meaning "someone who hires".
Zinga (2007) and Quiongodi (2013), citing several sources, refer to the existence of a
convergence in the idea that the first theoretician of entrepreneurship, also French, was
the economist Richard Cantillon (1680? -1734).
Cantillon defends, in a posthumous work dated 1755, that the “entrepreneur” is a full-
fledged economic agent, as “capitalists” and “workers” are, launching a debate on the
different roles of “entrepreneurs” and “businessmen”, a discussion that lasts until today.
At this stage, the concept was already associated with those who take risks and the
economic analysis advanced by Cantillon reveals that in those days in France there was
already an unexpectedly sophisticated capitalism.
Quiongodi (2013), also quoting several authors, points out that it was Cantillon’s initial
(or even initiatory) economic analysis that inspired Knight's (1921) work on uncertainty
and risk, a fundamental theoretical object for the development of Finance in the 1929
post-depression period.
The second key author of entrepreneurship was Jean-Baptiste Say (1767-1832), himself,
like Cantillon, considered out of the group of classical economists who started publishing
from the last quarter of the 18th century onwards.
According to Zinga (2007), citing Praag (1999), this author specified the role of the
entrepreneur as the manager of the initiatives (in principle, companies) he creates.
The next (classical) economist to contribute to the theoretical establishment of
entrepreneurship was Alfred Marshall (1842-1924). His most relevant contribution, also
highlighted by Zinga (2007) and Quiangodi (2013), was to define the entrepreneur as
someone who identifies business opportunities, a theoretical object of central importance
in the theoretical tradition of entrepreneurship.
The next author with high historical weight in entrepreneurship was Austrian economist
Joseph Schumpeter (1883-1950), whose core contribution was attributing to the
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
63
entrepreneur the fundamental task (for the economy) of “creative destruction” of
markets through innovation. In addition to breaking with the microeconomic tradition of
his predecessors, this theorist linked entrepreneurship to economic development for the
first time, making himself an indispensable source of several sub-disciplines of economic
science. In his view, economic rationality is not based on the search for balance but on
a permanent process of discovery, assimilation of information and rupture of the status
quo, which requires exceptional characteristics from the entrepreneur (Schumpeter,
1911).
Another highly relevant contribution was that of American economist Frank Knight (1885-
1972), who contributed to the theoretical development of entrepreneurship by
distinguishing between risk - random event with known probability - and uncertainty -
random event with unknown probability - and by establishing the relationship between
the entrepreneur and the generation of economic benefits by the company - the economic
agent who turns uncertainty into risk through judgment, with profit being the
remuneration for the risk taken (Knight, 1921).
In the second half of the twentieth century, there was a remarkable development in
entrepreneurship as a scientific discipline, as a result of the proliferation of scientific
publications and the very development of Management Sciences, which quickly adopted
entrepreneurship, although only attributing it a definitive status in the 21
st
century.
Going back to the 2nd half of the 20th century, it is important to mention Peter Drucker
(1909-2005), one of the great management theorists who decisively related
management to innovation, and the latter to entrepreneurship (Drucker, 1985).
Drucker's works, like those of other lesser-known authors highlighted by Sarkar (2014),
alongside the phenomenon of the so-called emerging economies, among which several
African countries find themselves, brought entrepreneurship definitely to the fore and to
full disciplinary status in its own right.
1.2. Theoretical evolution
Entrepreneurship is a theoretical object that permits different approaches. It has come
across different perspectives and even ontologies originating from various quarters, the
most significant being Economics, Finance, Management and Psychology (e.g. Sarkar,
2014).
Its theoretical evolution is associated with the historical evolution referred to in the
previous point, namely its origin at the beginning of the industrial era in France and later
adoption by several economists and management theorists.
Therefore, its genesis is "to undertake", to carry out any undertaking, "to do things". In
current language, “make it happen”. This basic ontology remains constant, despite all
the developments, until today (e.g. Sarkar, 2014).
Baumol (1990) points out that the most theoretical economists of the 18th and 19th
centuries were not substantially interested about it. For most authors of this period,
"entrepreneur" and "businessman" were one and the same, that is, the owner of the
company economic agent, regardless of the nature of the founding momentum.
In other words, economic science “stayed at the company's door”, and was not really
interested in its organizational dimension. Hence the development of organizational
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
64
sciences as early as the 20th century and the subsequent appearance of management
sciences, with symbolic birth in 1911, when companies started to have a significant
(social, economic and financial) dimension.
The second fundamental theoretical dimension of entrepreneurship is risk and
uncertainty, discussed above regarding Frank Knight. By the early 1920s, there were
already clear signs of an increasing prevalence of speculation in the North American
financial markets, which would favour the outbreak of the 1929 great depression.
However, learning to manage uncertainty, without aiming to eliminate risk, is a
fundamental attitude of economic agents, just as the serious global financial crisis of
2008 has shown.
The third important theoretical element is the orientation towards the identification of
(market) opportunities, also called “opportunity entrepreneurship”, in contrast to the
“survival entrepreneurship”, predominant in developing economies, as most African
countries are.
Schumpeter's works, in the first half of the 20th century, were decisive for establishing
a causal link between entrepreneurship and economic development, an analysis that
continued throughout the 20th century, together with the understanding of the
importance of innovation for the entrepreneurial process.
2. Entrepreneurship in Angola
2.1. Context of African entrepreneurship
According to Porter et al. (2002), the overwhelming majority of developing countries are
in the factor-driven economies category, that is, economies based on natural resources,
whether they are hydrocarbons with high market value or simply arable land.
In these economies, there is essentially “survival” entrepreneurship, since the
(technological) resource base available to entrepreneurs is not sufficient to generate
business opportunities.
Due to these circumstances, and contextual, political and cultural factors whose analysis
will be carried out subsequently, the so-called “informal economy” has been generalized
in Africa since the mid-twentieth century. There is a preponderance of single-person
microenterprises that never formalize their existence or economic activity (Ellis & Fauré,
1995). “The practicing economist present on the ground is struck by the creativity, by
the initiative of people in the urban setting, and by the emergence of new organizations
and an entrepreneurial spirit that escape accounting records”, in the words of Hugon
(2004, p.115).
The information that the origin of the African informal economy occurs when many of
these countries were colonies is addressed explicitly by several authors (e.g. Lopes,
2007) and was also transmitted to us orally by several "older" people who still survive
on this activity in Luanda, Bissau and Maputo.
The lack of an efficient labour market, poverty, lack of basic education and elementary
professional training, among other aspects, made evident through simple empirical
observation, certainly lie at the origin and explain the huge development of this form of
economic organization and entrepreneurship.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
65
As would be expected, the independence of African countries did not reverse this trend,
it only contained it, in some cases and for some time, until reality spoke louder.
However, since the 19th century there has also been a formal business base in Africa,
distinct from mere traditional mercantilism, much of it nomadic or quasi-nomadic and
originating in the Maghreb or the Sahara territories. However, this entrepreneurship did
not have an evolution similar to the one that occurred in Europe, the United States or
even Asia during the 20th century, since the colonial historical legacy was based on the
exploration of raw materials and not on the development of a true industrial capitalism
based on investment. In an attempt to make up for lost time, and under the influence of
an ancestral centralist political and economic tradition and doctrines of Marxist or similar
inspiration, many African governments tried to accelerate this process by creating large
public companies. This hampered the establishment of an indigenous or even foreign
entrepreneurship, as they created an anathema about them that still persists today in
many countries of the continent (Spring & McDade, 1998).
Finally, the situation of economic and political fragility in which many of African countries
find themselves, some of them immersed in endless, conventional civil wars - power
struggle between internal - or less conventional - forces generated by the different forms
of Islamic jihadism - gave rise to the origin of a kind of “war entrepreneurship” (Hugon,
2006).
2.2. Angolan colonial context in the 19th century
According to Henriques (1996), “the emergence of embryonic forms of ‘traditional’
African entrepreneurs can be found in the last quarter of the 19th century, as a result of
a double situation: the European commercial proposals and the existence of African
dynamic and flexible commercial structures capable of responding to challenges from
abroad”.
For his part, Fonseca-Statter (2008) states that in Africa “when trying to reflect on the
nature and origin of companies as eventual drivers of the development process, we are
forced to consider an approach that necessarily takes into account the concrete historical
perspective of the creation of these companies, as well as their relationship with the
regulatory role of the State”.
Analysing these sources, one notes the absence of the use of the term “entrepreneurship”
to characterize business activity, as the authors chose the “business company” formula.
Other authors confirm the same conclusion (e.g. Reis, 1996).
Thus, and for the purposes of this paper, we will consider “business companies” as a unit
of analysis synonymous with “entrepreneur”, whose more specific scope was analysed
earlier.
Returning to the question of 19th century Angolan entrepreneurship, it is part of an
evolution of the European view of Africa, resulting from a historical event of major
importance and impact: the (gradual) end of the export of slaves and their progressive
replacement by the so-called “legitimate trade”.
It is also important to note that the inter-African commercial transactions, pre-existing
the arrival of Europeans and involving political leaders and traders, remained throughout
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
66
the colonial period and (surprisingly) without any intervention from the Europeans.
Furthermore, they sought to impose their new rules on Europeans!
Carvalho (1984), quoted by Henriques (1996, p.56), states that at the end of the 19th
century, African commercial circuits based on the slave trade still prevailed in the
northeast of Angola, totally outside Portuguese control. This important historical fact for
understanding the genesis of the entrepreneurial initiative in Angola, centred on trade,
is also highlighted by Birmingham (2015).
Henriques (1996, p.57) stresses another aspect of enormous relevance for the purposes
of this paper: Africa’s saturation in relation to European (and Asian) goods and the
consequent search for new “productions to produce goods which, accepted by Europeans,
enable restoring African technical and commercial autonomy”.
This fact undoubtedly impacts the entrepreneurial activity and represents an
entrepreneurial attitude in the full sense of the term. Indeed, the development of
legitimate trade allows the emergence of small African traders acting autonomously.
Historical analysis also makes it possible to relate this entrepreneurial activity to
innovation, one of the most fundamental theoretical causal relationships from an
epistemological point of view.
In Angola in the second half of the 19th century, the development of entrepreneurship
led to the introduction of “new circulation techniques and diversified investment
capacities, opening up new areas for the exploration of natural resources and markets
[…]. It allows/requires inventing commercial practices more adequate to demand and
response, stimulates production, encourages technical innovation, organizes new forms
of work, introduces wages, trivializes credit, generates profits, creates capital, and
permits new investments” (Henriques, 1996, p.59).
The impact of entrepreneurship on social transformations is strengthened by several
authors quoted by Henriques (1996, p.61). “Business-type initiatives cannot fail to clash
with political leadership, just as they are forced to remove the burden of family
structures. We are not yet faced with the modern nuclear family, but we are already
faced with the need to reduce family intervention, the only way to have space for business
affirmation” (Henriques, 1996, p.62).
The aforementioned development of legitimate trade had yet another fundamental
consequence for the development of entrepreneurship: the generalized access of all to
the creation and pursuit of business, a central element of the same entrepreneurship, by
favouring competition and, consequently, increasing the efficiency of markets.
Henriques (1996, p.61) refers to a (first?) case of a successful Angolan entrepreneur,
Narciso António Paschoal, who by 1880 was already rich due to an impressive
entrepreneurial activity. This case is effectively an emblematic case because it is a figure
that already denotes all the characteristics associated with current entrepreneurs in 21st
century literature.
Another interesting case is that of the mestizo Lourenço Bezerra who, in the second half
of the 19th century, carried out intense entrepreneurial activity in Angola. Among other
businesses and initiatives, “the tobacco plantations he runs are proof of the
entrepreneurial spirit and modernizing practices of this African trader” (Henriques, 1996,
p.61).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
67
Therefore, there are no doubts about the emergence of entrepreneurship in Angola during
the second half of the 19th century, nor about the modern character of entrepreneurs of
that time. “These men who run commercial ‘companies’, organize the different factors of
production […] inventing solutions and productions in order to respond to external
demands, are the first examples of African businessmen […] and they highlight the
dynamism, flexibility, will and capacity for modernization of African societies” (Henriques,
1996, pp.64-65).
2.3. Pre-independence Angolan entrepreneurship
The historical period covered in this section applies, roughly, to the first three quarters
of the 20th century.
This period begins with the regicide of D. Carlos I and of the heir to the throne of Portugal,
on 1 February 1908, and the subsequent implantation of the Republic on 5 October 1910.
It was followed by the historic period of the First Republic, which ended with a coup d'état
on 28 May 1926.
These political transformations in mainland Portugal had a profound impact on the
political orientation and administration of the “overseas provinces”, substantially
reducing the autonomy that the Portuguese colonies historically had enjoyed.
A discussion on fascist doctrine for colonial management, with emphasis on the new
approach to racism that included a series of public exhibitions and monuments aimed at
building an official memory of the history of this overseas province (Ball, 2018), the
reorganization of the territory, forced relocation of native populations (Coghe, 2017;
Cruz, 2019), forced labour, collective punishment and deportations (Keese, 2015; Neto,
2019), does not fit within the scope of this work. It is only necessary to point out that
there was an interruption in the development of the entrepreneurship that had taken
place since the middle of the previous century, with strong consequences on the
possibility of capital accumulation by the African peoples.
Together, these factors favoured the development of “pan-Africanism” in Portuguese
colonies, the antithesis found for the upsurge of Portuguese imperialism in Angola and in
other Portuguese territories in Africa.
Pan-Africanism is “probably the most inclusive political movement of its time. It was a
kind of nationalism uniting all those who thought that Africa should regain control of its
own land by allying itself with the descendants of African slaves from the New World who
were still the object of racial exclusion there” (Hart, 2007, p.95).
During this period, the institution of the “informal economy” was seen as a (new) way of
pursuing entrepreneurship, no longer an opportunity entrepreneurship, but essentially a
survival entrepreneurship, the result of economic and social exclusion and of worsening
social inequalities.
It is a phenomenon that began to take shape with the urban revolution that occurred in
Africa in the historical dynamics of the 20th century and that peaked in the transition
from social democracy to neo-liberalism in the post-colonial period (Hart, 2007, p.97).
Grassi (1998) infers that “as the informal market is the predominant economic reality in
many countries in sub-Saharan Africa, […], it is in this space that, probably, although not
exclusively, one has to look for the emerging African entrepreneur”.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
68
Lopes (2007, p.40) explicitly confirms the existence of an informal pre-independence
economy in the city of Luanda. These “informal activities performed a strictly subsidiary
function of the formal sector of the economy, dominant, structuring and endowed with
the indispensable control and regulation mechanisms. The informal economy of Luanda
was restricted to traditional handicraft activities, the provision of services - namely
domestic services -, street commerce, door-to-door commerce, markets in slum areas,
and activities related to the construction of housing for indigenous populations in its
periphery”.
Although there are (naturally) no official statistics that allow the phenomenon to be sized
with absolute precision, the same source, citing data from 1995, states that “the informal
economy of Luanda exclusively ensured the subsistence of 42% of families, representing
56% of the economically active population (population with 10 years of age or older) in
the Angolan capital” (Lopes, 2007, p.39).
Several other studies, cited in the same work, allow us to estimate that the informal
economy represented around 50% of the Angolan non-oil sector in this period, with a
tendency to stabilize around this percentage, despite several increases and decreases to
date.
Outside the informal economy, Rodrigues (2008), using data collected by Rela (1992),
points out that in 1955, three quarters of the 1,810 companies registered in Angola were
linked to agricultural production and semi-artisanal activities, such as mills, bakeries and
joineries. There were no more than 12 industrial companies, almost all located in Luanda.
The same source states that “after the second world war, the increase in the importance
of the port of Luanda - which started to compete with the largest one to date, Lobito -
associated with the increase in commercial activity, made Luanda an attractive place for
the implantation of industry” (Rodrigues, 2008, p.194). According to this work, by 1962
the number of companies operating in Angola had risen to 2,057 (13.64%) and the
number of industrial companies to 19 (58.33%).
In the period between 1962 and 1973, on the eve of independence, “Angola’s industrial
production grew at a very high rate - around 15% per year - and in 1973, industrial
production was linked to the light industry, concentrating on food (27.4%), beverages
(11.3%), textiles (12.4%), chemical industry (11.7%) and the metal-mechanical sector
(6.4%) (Rodrigues, 2008, p.190).
Using data from Ferreira (1999), Rodrigues (2008, pp.190-191) states that when
independence took place, there were 3,846 companies in Angola’s manufacturing
industry. However, external dependence was around 50%, mainly for semi-finished
products and raw materials.
What is not clear, in this analysis, is the weight of entrepreneurship in all this business
activity, due to the industrial and agricultural constraints in the Portuguese empire. In
fact, in this historical period, the business community of the time had little in common
with the one described in the previous historical period.
Another relevant economic element of this period is the widespread use of child labour
in Angola, which grew since the total ban on illegitimate trade and came to support the
development of large extractive activities, namely the diamond sector (Cleveland, 2010).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
69
2.4. Development of entrepreneurship in the post-colonial period
Lopes (2007, pp.37-38) refers that, until that date, one could speak of five distinct phases
in the historical process of Angola’s economy: (i) the transition period to the centralized
economy (1975-1977), characterized by nationalizations and creation of state
monopolies; (ii) the period of economic centralization and administrative regulation of
the economic system (1977-1987); (iii) the embryonic period of the transition to the
market economy (1987-1992), characterized by the progressive liberalization of the
economy; (iv) the period of conditioned continuity (1992-2002), limited by the war
effort; and (v) the period of macroeconomic stabilization in the context of peace, which
has run since 2002.
Looking at this path, it seems clear that one can only speak again of (true)
entrepreneurship in Angola after 2002 and, even so, adjusted by the economic
informalization phenomenon.
The external economic dependence conditions that were already visible at the end of the
colonial period conditioned the country's economic trajectory in the post-independence
phase. “[…] The socio-cultural aspects were the determining factors for the stagnation of
productive activities in Angola: the poor qualification of the workforce, the ‘external’
character of investment and industrial development […] the lack of ‘industrial culture’,
factors which, together with economic centralization - and the subsequent incapacity for
economic management - and the war that started after independence, created the
industrial scenario that existed until the beginning of the 1990s” (Rodrigues, 2008, p.
191).
There is also the interference of a fundamental (external) geopolitical element that had
a decisive impact on the economic policy options and the degree of economic
liberalization. It was the cold war, which was exported to Angola at an unprecedented
level on the African continent (Sá, 2019).
From the same data, we can see that a decade after independence, the number of
companies in operation had decreased from 4,000 to just 280, as a result of the Marxist-
Leninist economic orientation implemented in the country and a large-scale migratory
movement of people who fled the civil war (e.g. Schenck, 2016). It is possible to notice
other factors with significant impact on the reduction of entrepreneurial activity until
1990: “difficulty in obtaining raw materials and energy, [and] degradation of existing
equipment” (Rodrigues, 2008, p. 193). This was as consequence of the armed conflict
and the adopted economic model.
The civil war in Angola and its devastating effects on the country's fragile economy
accelerated the end of Marxism and the transition to a more open and liberal economic
system in the period 1987-1992 (Pryor, 2005).
Still regarding the 1990s, it is important to mention Reis’ study (1996), which provides
some information on, among other aspects, entrepreneurial motivations and the
characterization of the Portuguese Speaking African Countries’ entrepreneurial base,
including Angola.
The data collected between 1991 and 1994 allows us to conclude that the main
entrepreneurial motivations in Angola, were: “to provide security for the wife and
children”, “to contribute to the well-being of family members” and “to continue learning”.
Regarding values and culture, it was possible to conclude that Angolan businessmen
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
70
agreed that “the change in social status is within everyone's reach”. Looking at the results
as a whole, it seems that there was a certain ambivalence in the entrepreneurial logic,
between survival, well-being and social ascension.
Entrepreneurial activity evolved significantly in Luanda: in 1997 there were 611
registered industrial companies and in the following year the number rose to 637,
according to data from the National Statistics Institute of Angola, cited by Rodrigues
(2008, p. 203).
As of 2002, the situation has changed. Thanks to a new form of business registration,
REMPE, there are 10,609 companies registered in Luanda, of which 1,042 in the
manufacturing industry.
The same source also informs that, between 2003 and 2004, there was a huge growth
in the production of frozen fish, dried fish and common salt, with a decrease only in the
production of artisanal fish (Rodrigues, 2008, p. 209).
Fonseca-Statter (2008, pp.52-61) refers to the situation in the years 2004-2005, trying
to specifically characterize opportunity entrepreneurship in Angola (and in Mozambique
too).
In particular, the following conclusions are highlighted: predominance of entrepreneurs
from the public sector; prevalence of “Creole” entrepreneurs; entrepreneurs’ discomfort
regarding the lack of efficiency of the public administration; high level of unemployment
and small size markets.
At the same time, the same businessmen had the explicit objective to diversify and
expand, suffering, consequently, from insufficient own funds and dependence on access
to sources of other capital such as banking and venture capital, as well as the lack of
qualified workforce.
The same source notes in Angola an environment “of almost euphoria and ambition,
albeit mitigated by feelings of frustration in the face of difficulties”, leading to a model of
“self-centred national reconstruction (of the type “there is everything here”)”.
Anjos (2009) notes that, according to the World Bank's “Doing Business 2008” report,
Angola has an entrepreneurial performance below the average of oil-producing countries
and Portuguese-speaking countries, being 167th out of the 178 countries studied.
As the main barriers to entrepreneurship, the length to set up a company and the
difficulties in complying with the various administrative requirements stand out. The
impact of corruption, supported by data from the International Monetary Fund, is also
mentioned, considered one of the most important barriers to the development of
entrepreneurship.
Ekungu (2016) notes that entrepreneurship is so central to the economic development
of African countries that the United Nations itself, through UNIDO, started to work with
these countries in the sense of entrepreneurship being introduced in the secondary
education curriculum. In the case of Angola, such work started to be done in 2004, with
a formal recognition of its importance in June 2007 with the approval of the national
programme “Business Education in Secondary Education in Angola”, carried out in the
2011 academic year through the publication of Order No. 214-A/10 of the Ministry of
Education on 5 November 2010.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
71
2.5. Entrepreneurship in the contemporary period
The period 2002-2013 is undoubtedly the period of greatest expansion of
entrepreneurship in the country, due to continuous economic growth and an environment
of near social euphoria. However, it is also a period of appropriation and even confiscation
of the country's main assets by the political elite, creating “state entrepreneurship”
(Ovadia, 2018).
In mid-2014, a sharp and persistent drop in the price of oil in international markets
began, causing a deep financial crisis in Angola and opening the door to a “continuity”
political transition through the announcement of President José Eduardo dos Santos, in
March 2016, that he would not re-apply for a new term in 2018, ending 39 years of office.
The worsening of the financial crisis peaked at the end of 2015. Between November and
December of that year, all banks that sold physical US dollars (in notes) to Angola, except
one, had this authorization revoked by the American Federal Reserve. At the same time,
Angola was prevented from issuing sovereign debt securities in American currency,
throwing the country into a currency and severe liquidity crisis.
This crisis had, among many others, two important consequences with a negative impact
on the evolution of entrepreneurship in Angola: first, an increase in China's importance
in the country's economy and political decisions and, secondly, a banking crisis of a
dimension yet to be known.
With regard to Sino-Angolan relations, they date back to the period of the struggle for
national independence, with China providing financial support to UNITA until 1970 and
then focusing its support on the MPLA from 1972 onwards (Garret, 1976). After the
explosion of Chinese economic growth as a result of its accession to the World Trade
Organization, China’ energy needs grew exponentially and Angola's importance for
meeting those needs became especially relevant. In 2007, China overtook the USA as
the main importer of Angolan oil and, in 2008, Angola represented 18.2% of total Chinese
oil imports, reaching 204 million tons in 2009 (Burgos & Hear, 2012). Between 2016 and
2018, China became the main financier of the Angolan economy, exchanging products
and services directly for oil, without circulating liquidity for Angola’s economy. This
exchange, whose concrete terms were never disclosed, rendered many of the existing
and potential Angolan entrepreneurial initiatives unfeasible as Chinese goods and
services are supplied and provided directly by Chinese companies using an overwhelming
majority of labour and raw materials brought directly from China.
Regarding the banking system, it developed during the phase of accelerated economic
growth (2002-2013) in a logic of financing the aforementioned “State entrepreneurship”,
while the oligarchic consolidation of the ruling MPLA elite lasted (Ferreira & Oliveira,
2018), which pushed Angola to the category of kleptocracy as the “Luanda Leaks” scandal
reported in January 2020, revealing the contribution of the branches of three Angolan
banks in Portugal in various international money laundering operations under
investigation by several European authorities. With the financial crisis that started in
2014, many of these banks, heavily indebted in dollars in the international market to be
able finance numerous large-scale real estate projects, are in illiquidity and no longer
able to finance national and local entrepreneurship, even at two-digit interest rates. And
even those entrepreneurs who had already acquired some financial capacity due to the
consolidation of their domestic commercial operation during the previous period, are
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
72
prevented from acquiring raw materials in the international market due to lack of access
to foreign currency, resulting in the collapse of most of these initiatives.
Conclusion and reflection on the future
This work aimed to provide a historical perspective on the path of entrepreneurship in
Angola, valuing its geographical dimension and the historical framework of
entrepreneurship itself, as a concept, as an economic reality, and as a theoretical object.
It is only an exploratory study due to the relative scarcity of sources of information on a
topic that is, perhaps, too specific.
Despite these limitations, it was still possible to draw some interesting conclusions.
Firstly, it is noted that the “entrepreneurship” concept was born outside the theoretical
mainstream, even by 18th century standards, and, to a large extent, was always much
more a concept of “practical” than “academic” nature, until practically the 21st century.
The context of African entrepreneurship is currently one of survival entrepreneurship,
given the vicissitudes of the historical process that prevented this continent, with few
exceptions, from accessing scientific and technological infrastructures that properly
support it.
It was also possible to identify, using several sources, that this entrepreneurship is closely
linked - in about 50%, based on different estimates made in Angola in particular - to the
so-called “informal economy”, a historical process of economic disruption resulting from
the urban revolution that occurred in Africa during the 20th century.
On the development of entrepreneurship in Angola, specifically, it was possible to locate
the genesis of this phenomenon in the last quarter of the 19th century, in the context
established in that country after the end of slave exports and the flourishing of legitimate
trade.
It was possible to identify an individual entrepreneur with special historical interest, as
he was certainly one of the first successful African entrepreneurs, from the business point
of view, in Angola. He was Narciso António Paschoal and was active in 1880. He was
surely not a stereotype, but his story proves the possibilities that were open to Angolan
entrepreneurs in that period.
The analysis of Angolan entrepreneurship in the period between the end of the 19th
century and 11 November 1975, the date of the country's independence, is hampered by
the difficulty in accessing information sources.
However, it was possible to conclude that the political transformations that took place in
mainland Portugal at the turn of the century, culminating in the coup d'état of 28 May
1926, led to the (almost) dismantling of the African entrepreneurial base in Angola, and
even that of Portuguese economy origin was strongly limited by industrial and agricultural
conditioning.
Angola's independence did not improve the country's business context, given the
instability in which it is submerged as a result of the civil war that followed and the
political option of alignment with the communist bloc led by the Soviet Union.
Until 1992, one cannot talk of a setback in entrepreneurial activity only because of the
huge increase in the informal economy. From that year onwards, in the post-fall of the
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
73
Berlin Wall context and in the rubble of the first peace process, there was a reversal of
that trend.
Another conclusion of this work is that we can only truly talk about entrepreneurship in
Angola from 2002 onwards. However, the historical period that may have ended in 2014,
presents the fight against corruption as a central challenge, as has been claimed by
important international organizations such as the World Bank and the International
Monetary Fund.
Based on the emphasis given by these bodies to the development of entrepreneurship,
the relevance of its influence on economic development is also proven.
Also worth mentioning is the programme to introduce entrepreneurship education in the
secondary education system in Angola, which started in 2011 and will certainly make a
positive contribution in the context of the new Angolan historical dynamics, following the
recent change of president.
Regarding the contemporary period, it should be noted that the financial crisis that
started in mid-2014 has had extremely negative consequences on Angolan
entrepreneurship. The reasons include the “invasion” of Chinese companies in all sectors
of the country's economy, generating unfair competition in relation to local
entrepreneurs, the collapse of liquidity in the banking system, which is no longer able to
leverage existing or emerging entrepreneurial activity, and the extreme difficulty in
accessing foreign exchange for the import of raw materials and fundamental services for
the companies.
Finally, a brief reflection on scenarios for the future development of entrepreneurship in
Angola. Undoubtedly, in the short term all the factors that have contributed negatively
to the current situation will become even worse due to the pandemic crisis generated by
Covid-19 in mid-March 2020. In the medium and long term, entrepreneurship is expected
to increase in importance and weight in the generation of national wealth since, on the
one hand, there are no alternatives to the country's economic diversification strategy,
and, on the other, the conditions for foreign direct investment will not be attractive in a
predictable context of greater market efficiency and less political intervention in the
economy. In this scenario, and considering that the country's financial recovery will take
place in an effective although gradual way, Angola may count, among other elements
that have already been important in the recent past, such as the ambition and optimism
of its entrepreneurs, on the creative capacity of its human resources (De Clercq & Pereira,
2019), on its privileged coastal location and low ethnic heterogeneity (Decker, Estrin &
Mickiewicz, 2020), which may mitigate the country’s lack of qualifications and scientific
and technological capacity.
References
Anjos, P. (2009). Developing Angola’s next generation of business leaders and
entrepreneurs. Master Degree Dissertation in International Management, ISCTE-IUL,
Lisbon. 78 p.
Ball, J. (2018). «Staging of memory: Monuments, commemoration, and the demarcation
of Portuguese space in colonial Angola». Journal of Southern African Studies, 44(1): 77-
96.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
74
Baumol, W. J. (1990). «Entrepreneurship: Productive, Unproductive and Destructive».
Journal of Political Economy, 98(5): 893–921.
Birmingham, D. (2015). A Short History of Modern Angola. Hurst & Company, London,
159 p.
Burgos, S.; Ear, S. (2012). «China’s oil hunger in Angola: History and perspective».
Journal of Contemporary China, 21(74): 351-367.
Cleveland, T. (2010). «Minors is name only: Child laborers on the diamond mines of the
Companhia de Diamantes de Angola (Diamang), 1917-1975». Journal of Family History,
35(1): 91-110.
Coghe, S. (2017). «Reordering colonial society: Model villages and social planning in rural
Angola, 1920-45». Journal of Contemporary History, 52(1): 16-44.
Cooper, B. M. (2005). «Oral Sources and the Challenge of African History». In John
Edward Philips (org.), Writing African History. University of Rochester Press, 191-214.
Cruz, B. P. (2019). «The penal origins of colonial model villages: From aborted
concentration camps to forced resettlement in Angola (1930-1969)». The Journal of
Imperial and Commonwealth History, 47(2): 343-371.
De Clercq, D.; Pereira, R. (2019). «Resilient employees are creative employees when the
workplace forces them to be». Creativity and Innovation Management, 28(3): 329-342.
Decker, S.; Estrin, S.; Mickiewicz, T. (2020). «The tangled historical roots of
entrepreneurial growth aspirations». Strategic Entrepreneurship Journal, 14
(Forthcoming).
Drucker, P. (1985). Innovation and Entrepreneurship – Practice and Principles.
Routledge: London and New York. 330p.
Ellis, S.; Fauré, Y. A. (1995). Entreprises et Entrepreneurs Africains. Karthala et Orstom.
324p.
Ekungu, M. (2016). A Implementação do Programa de Empreendedorismo no Currículo
do Ensino Secundário em Angola (2009-2014) – Caso da Província da Huíla. Master
Degee Dissertation in Public Policies, ISCTE-IUL, Lisbon. 37p.
Ferreira, M. E.; Oliveira, R. S. (2018). «The political economy of banking in Angola».
African Affairs, 118(470): 49-74.
Fonseca-Statter, G. (2008). «Do Empreendedorismo ao Empresariado. Da Revolução
Industrial à África Sub-Sahariana Pós-Colonial». In J. F. Feliciano; G. Fonseca-Statter
(org.), Empresariado, Empreendedorismo e Desenvolvimento em Angola e Moçambique.
Lisbon: Centro de Estudos Africanos, 26-65.
Garret, J. (1976). «The lessons of Angola: An eyewitness report». The Black Scholar,
7(2): 46-59.
Grassi, M. (1998). «O papel da mulher empresária angolana no desenvolvimento do país:
empresárias de Luanda e Benguela». Economia Global e Gestão, 3(1-2): 209-226.
Hart, K. (2007). «The African Revolution: urban commerce and the informal economy».
Global Economics and Management Review, 12(3): 93-104.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
75
Henige, D. (2005). «Oral Tradition as a Means of Reconstructing the Past». In John
Edward Philips (org.), Writing African History. University of Rochester Press, 169-190.
Henriques, I. C. (1996). «Origens do empresariado angolano (séc. XIX)». Economia
Global e Gestão, 1(1): 55-74.
Hugon, P. (2004). The Economy of Africa. Protea Book House, Pretoria, 131p.
Hugon, P. (2006). «Conflictualité armée en Afrique : le rôle des facteurs économiques».
The European Journal of Development Research, 18(2): 255-274.
Keese, A. (2015). «Developmentalist attitudes and old habits: Portuguese labour policies,
South African rivalry, and flight in southern Angola, 1945-1974». Journal of Southern
African Studies, 41(2): 237-253.
Knight, F. (1921). Risk, Uncertainty, and Profit. Hart, Schaffner & Marx, Boston, MA
[online version accessed on http://www.econlib.org/library/Knight/knRUP.html]
Lopes, C. M. (2007). «Comércio informal, transfronteiriço e transnacional: que
articulações? Estudo de caso no mercado de S. Pedro (Huambo) e nos mercados dos
Kwanza e Roque Santeiro (Luanda)». Economia Global e Gestão, 12(3): 35-55.
Neto, M. C. (2019). «Colonial incarceration and selective memories: What is
remembered? Who is forgotten? The case of peasant women deported to São Nicolau
(Angola, 1969)». The Journal of Imperial and Commonwealth History, 47(2): 325-342.
Ovadia, J. S. (2018). «State-led industrial development, structural transformation and
elite-led plunder: Angola (2002-2013) as a development state». Development Policy
Review, 36(4): 587-606.
Parker, J.; Rathbone, R. (2007). African History: A Very Short Introduction. Oxford
University Press, 131 p.
Porter, M. E.; Sachs, J. J.; McArthur, J. W. (2002). «Executive Summary:
Competitiveness and Stages of Economic Development». In M. E. Porter; J. J. Sachs; P.
K. Cornelius; J. W. McArthur; K. Schwab (org.), The Global Competitiveness Report 2001-
2002. New York: Oxford University Press, 16-25.
Pryor, F. L. (2015). «The rise and fall of Marxist regimes: An economic overview». Orbis,
49(1): 123-140.
Quiangodi, H. (2013). Avaliação do Potencial Empreendedor: Um Estudo de Caso em
Angola. Master Degree Dissertation in Development Policies and Human Resources,
ISCTE-IUL, Lisbon, 98 p.
Reis, E. (1996). «Empresariados nacionais na África Lusófona – Uma análise empírica».
Economia Global e Gestão, 1(1): 25-54.
Rodrigues, C. U. (2008). «Empresariados Angolanos no Pós-Guerra: Modelos Herdados,
Exigências do Capitalismo e Estratégias dos Trabalhadores». In J. F. Feliciano; G.
Fonseca-Statter (org.), Empresariado, Empreendedorismo e Desenvolvimento em Angola
e Moçambique, Lisbon: Centro de Estudos Africanos, 186-216.
Sá, T. M. (2019). «”The world was not turning in their direction”». Journal of Cold War
Studies, 21(1): 52-65.
Sarkar, S. (2014). Empreendedorismo e Inovação. Escolar Editora, Lisbon, 378 p.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.60-76
A historical perspective of entrepreneurship in Angola
Renato Pereira
76
Schenck, M. C. (2016). «From Luanda and Maputo to Berlin – uncovering Angolan and
Mozambican migrants’ motives to move to the German Democratic Republic (1979-
1990)». African Economic History, 44(2): 202-234.
Schubert, J. (2015). «2002, Year Zero: History as Anti-Politics in the ‘New Angola’».
Journal of Southern African Studies, 41(4): 1-18.
Schumpeter, J. A. (1911). The Theory of Economic Development: An Inquiry Into Profits,
Capital, Credit, Interest, and the Business Cycle. Harvard University Press, Cambridge,
MA [translated into English by Redvers Opie in 1934]
Spring, A.; McDade, B. E. (1998). African Entrepreneurship – Theory and Reality.
University Press of Florida, 331p.
Zinga, A. (2007). Os Determinantes do Empreendedorismo: Um Estudo Empírico no
Contexto Angolano. Master Degree Dissertation in Management Studies, Faculty of
Economics of the University of Coimbra, 138 p.
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 77-97
THE IMPORTANCE OF LATIN AMERICAN SPACE
IN THE INTERNATIONALIZATION OF PORTUGUESE SMEs
André Brás-dos-Santos
Bras_dos_santos.a@hotmail.com
PhD student in History at Universidade Autónoma de Lisboa (UAL, Portugal), Master in
Development and International Cooperation and Graduated in Management. Member of the
Research Center for Historical Sciences (CICH) and the Business History Research Center (CEHE)
of the Universidade Autónoma de Lisboa (UAL). Has been linked to Portuguese SMEs and to the
internationalization of the Portuguese companies through professional channels and academic
research. He managed a project linked to the “Rede PME Inovação” of COTEC Portugal, was
present in several business missions through the Association of Portugal-China Young
Entrepreneurs, and was a consultant in the agro-industrial sector.
Joaquim Ramos Silva
jrsilva@iseg.ulisboa.pt
Full Professor, Instituto Superior de Economia e Gestão, Universidade de Lisboa (Portugal). PhD
in “Analyse et Politique Économiques” by the École des Hautes Études en Sciences Sociales,
Paris. Member of the SOCIUS/CSG – Research in Social Sciences and Management, a FCT Center.
His research has focused on several topics of international economics and has conducted studies
on the global, European, Portuguese and Brazilian economies with an emphasis on the
internationalization process of companies and in the development and foundations of economic
relations between Portugal and Brazil. Author of numerous publications, including books, book
chapters and articles in peer-reviewed journals, among others, in Tourism Management, Business
Process Management Journal, Journal of Business Economics and Management, Journal of
Enterprise Information Management, Marine Policy and Technological Forecasting and Social
Change.
Abstract
In the light of the transformation undergone in the last decade by the Portuguese economy,
the internationalization of Portuguese companies through exports had a considerable growth,
reducing the importance of domestic demand as the main variable in the contribution to GDP,
this work addresses the role of SMEs in this process, analyzing the case of their
internationalization to the Latin American space. The study is based on an empirical analysis
of data resulting from a survey conducted in 2014, period where the transformation became
clear, through the responses of 50 internationalized Portuguese SMEs to Latin America, which
have been validated. Also, and with a focus on this research, the process was correlated with
the relevant theories of internationalization, paving the way for more in-depth and
methodologically based studies on this relationship with significant potential, but still little
analyzed in the context of the Portuguese economy.
Keywords
SMEs, Latin America, Portuguese internationalization, Exports, FDI
How to cite this article
Brás-dos-Santos, André; Silva, Joaquim Ramos (2020). "The importance of Latin American
space in the internationalization of Portuguese SMEs". JANUS.NET e-journal of International
Relations, Vol. 11, N.º 1, May-October 2020. Consulted [online] on the date of the last visit,
https://doi.org/10.26619/1647-7251.11.1.6
Article received on August 7, 2019 and accepted for publication on March 10, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
78
THE IMPORTANCE OF LATIN AMERICAN SPACE
IN THE INTERNATIONALIZATION OF PORTUGUESE SMEs
André Brás-dos-Santos
Joaquim Ramos Silva
1. Introduction
The last decade presented a set of profound changes in the Portuguese economy,
especially considering the two most negative milestones of its recent economic history:
the impact of the global economic crisis triggered in 2007-08 and the subsequent rescue
request to the IMF in 2011. It should be noted that the Portuguese gross domestic
product (GDP) showed a recession in the period 2010–2015 with an annual rate close to
-1%
1
. Indeed, the country's economic growth was then in counter-cycle with the recovery
seen in most European countries, which showed a modest but effective average growth
rate of 0.6% in the same period. However, as of 2014, Portuguese GDP gradually
resumed growth, especially for the years 2016-2018 (respectively, 1.9%; 2.8%; 2.2%),
even surpassing, after a long period of non-convergence, the average GDP growth rate
of the European Union
2
.
Although the changes in the Portuguese economy were not confined to the external
sector, the process of the last decade was accompanied by important shifts at this level.
Thus, the country's current account registered a turnaround in its performance insofar
until the end of the first decade of the XXI century it was clearly in deficit (even reaching
10.2% of GDP in 2010), unraveling an economic model based on the expansion of
domestic demand boosted by imports. Just after, as of 2013, the Portuguese economy
showed a surplus in the current account (which represented 1.6% of GDP in 2013)
3
,
showing a shift towards a growth model more supported by an internationalization of
firms and activities. Moreover, from 2013 to 2017, the current account registered 5
consecutive years with a surplus, respectively, as a percentage of GDP, of 1.6%; 0.1%;
0.1%; 0.6%; 0.5%
4
, numerical values with little significance, but striking from the point
of view of the historical trend. It is true that in 2013-14, this surplus may also have
resulted from the fall in imports caused by the recession and the policy measures
associated to overcome it, but its persistence over a wider period and in quite different
economic situations can create conditions for more structural changes.
It is important to note that, in light of the experience of the last decades, and towards
an approximation to the existing model in European economies of comparable size, the
change in the current account (which, incidentally, could be illustrated at other levels of
1
Source: UNCTAD database 2018 (Gross domestic product: Total and per capita, growth rates, annual,
1970-2016).
2
Source: Pordata – 2019.
3
Source: UNCTAD database 2018 (Balance of payments, Current account balance, annual, 1980-2016).
4
Source: Pordata – 2019.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
79
external accounts, such as the goods and services account that also substantially
improved its balance, or the financial balance; Silva, 2019: 72-3) was one of the main
transformations of the Portuguese economy in the period under analysis. However, only
the future can tell us if this is a strategic turning point leading to a consistent reduction
in the importance of the traditional external constraints of the Portuguese economy. On
the other hand, this process led to an increase in the internationalization of Portuguese
companies induced by cyclical factors such as the lack of internal stimuli, in particular
subsequent to the strong fall in domestic demand in the years 2011-2013, corresponding
to -5.5%, -7.3%, -2.5%
,
respectively in terms of homologous change (Table 1), and the
lack of credit that has lately affected the companies, with emphasis on the Small and
Medium Sized Enterprises (SMEs)
5
. In this regard, it was highlighted how “the estimates
on the extensive and intensive margin suggest that a significant fraction of Portuguese
SMEs was affected by financing restrictions. The results also suggest that smaller and
younger companies were the most affected” (Farinha and Félix, 2014: 16).
Table 1 – Portuguese Economic Indicators 2010-2018: annual change in domestic demand and
exports
Source: Banco de Portugal Spring Economic Bulletin, years 2010-2018 and Pordata, handled by
the authors themselves.
Bearing in mind the objectives of this article, starting from what was previously
mentioned, it is necessary to go further in the study of the internationalization of the
Portuguese economy and firms, focusing on the case of SMEs, which are a fundamental
pillar of the Portuguese enterprise structure (Table 2). Without wishing to underestimate
the role and potential of large companies or the diversity within SMEs, it is important to
emphasize that internationalization has a great impact on the economic performance of
these companies, namely in the introduction of new products and services in the sectors
where they operate, as well as internationalized SMEs are more likely to internalize active
innovation processes, compared to those that only operate in the domestic market
(European Commission, 2010).
Table 2 – Structure of SMEs and Large Companies in the Portuguese Non-financial Sector
Source: INE - Business statistics 2016 and treated by the authors themselves.
This work also aims to enlarge the research that has been carried out on the
internationalization of Portuguese companies. In particular, we analyze here its
orientation towards Latin American countries (focusing on the case of Ibero-American
5
We consider SMEs according to the European definition included in the Commission's recommendation
2003/361, which considers companies with less than 250 employees, a turnover of less than 50 million
euros, a total balance sheet of less than 43 million euros; for a more detailed overview of the importance
of SMEs in Portugal, see Silva and Simões, 2012: 824.
Number of Enterprises % Workers (Nr.) % GVA (millions €) %
SME 1 195 064 99.9% 2 957 309 79.8% 54 265 63.5%
Big Enterprises 1 038 0.1% 747 431 20.2% 31 145 36.5%
Total 1 196 102 3 704 740 85 410
Years 2010 2011 2012 2013 2014 2015 2016 2017 2018
GDP (%) 1.9 -1.3 -4 -1.6 0.9 1.8 1.9 2.8 2.1
Contribution of domestic demand to GDP 0.4 -2.9 -7.6 -2.5 0.3 1.1 0.9 1.3 1.3
Contribution of exports to GDP 1.5 1.7 3.6 0.9 0.6 0.6 0.9 1.5 0.8
Domestic demand annual change (%) 1.9 -5.5 -7.3 -2.5 2.2 2.7 2 3 2.8
Exports (weight in GDP in %) 30.1 35 38.2 40.3 40.9 41.2 40.7 43.3 (prov.) 44.3 (prov.)
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
80
countries),
6
not only because it is a close space in linguistic and historical terms to
Portugal, but also because there was an increase in the economic potential of this region
since the beginning of the century, opening up new opportunities for business.
Consequently, and although Latin American countries are far from homogeneous (Graph
1), these markets may be important for Portuguese companies, especially SMEs, and in
general for the Portuguese economy in search for a greater diversification of its external
relations.
Graph 1- Latin American Countries: Growth trends, 2009-2017 (Rate of
year-on-year change in quarterly GDP between the 1st trimester 2009 and the 1st trimester 2017)
Source: CEPAL – Panorama Económico y Social de la Comunidad de Estados Latinoamericanos y
Caribeños, 2017.
We thus seek to bring a new angle to the research on the internationalization of
Portuguese SMEs, knowing that there is a scarcity of studies aiming at the analysis of the
external economic relations of Portugal with the Latin American space (Silva, 2008),
especially if we exclude Brazil, as well as its results are still little known. For the
construction and validation of this study, we started from a set of questions: What are
the main difficulties and requirements faced by companies when entering these markets?
What internationalization process did they follow? What types of support did they have
and how do they evaluate them? In terms of methodology, our work is based on the
analysis of statistical series, but above all it is based on a direct survey carried out in
2014 to a significant group of Portuguese SMEs that have internationalized to Latin
American markets, thus reinforcing the study of the transition process towards greater
internationalization of the Portuguese economy through a relevant empirical basis.
Taking into account the features of the Portuguese economy up to the mid-2010s that
we have presented above, particularly in terms of its external relations, and the
objectives of this research, related to the internationalization of Portuguese companies,
more accurately of SMEs to Latin America, several sections compose the article. In
Section 2, we present a brief theoretical framework, exposing the main theories related
to international trade and foreign direct investment (FDI), which are relevant in our
context. In Section 3, we address the issue of the Ibero-American Space, considering
these nations as a whole, and the integration frameworks in which they are involved, in
6
The issue will be detailed below, in Section 3. Considering that the problems related to the economic
relations between Portugal and Spain have a very different context compared to that of American
counterparts, accordingly, Spain will not be considered for the purposes of the central theme of this work,
therefore, we will only address its case, in the context of the Iberian integration process in the European
Community, and within the subsequent steps that were taken with a view to Ibero-American integration,
insofar as these processes (economic integration) are relevant in the context of relations between Portugal
and Latin American countries.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
81
particular that of the European Union for Portugal and Spain, an important vector, since
it regulates a large part of the transactions under study. Section 4 is essential within the
scope of this article, as it presents the survey carried out on Portuguese SMEs in their
internationalization to Latin America, refers to the methodology that was followed, shows
the results that were achieved, commenting on them and extracting a first set of
conclusions about the process. Finally, Section 5 summarizes the main conclusions and
raises some issues for further research.
2. Theoretical Framework
Considering the importance that internationalization processes have assumed in recent
decades for most economies, it is necessary to present the theories that explain them,
in particular with regard to its most significant flows and of greatest impact: international
trade and foreign direct investment. This is what we do now, in an abbreviated manner
and focusing on the essential.
Basically, according to the main theories on trade, the internationalization of economies
goes through a process that leads to their specialization in certain products, based on
the advantages that the country has, creating conditions for the exchange between
commercial partners, through a greater efficiency that leads to an increase in output
(with the same level of resources) to be shared. This approach was central to the classical
authors of economic science, namely Adam Smith in his work Wealth of Nations (1776)
whose lens used what would become known as the Theory of Absolute Advantages.
According to Smith, countries should specialize according to their lower cost production
(measured by labor cost, the only factor of production considered by these authors).
However, considering two countries, this theory states that if one of them had lower costs
in all relevant productions, it would have no interest in doing trade with the other and
there would be no international specialization. David Ricardo will overcome this limitation
in his reference work Principles of Political Economy and Taxation (1817), through the
Theory of Comparative Advantages, which reformulates the question in other terms
justifying trade even if one of the countries had all the absolute cost advantages in the
production of goods. Rather, countries should specialize in products that have the lowest
relative (and not absolute) cost, focusing on what they did most efficiently and opening
up a wider space for international trade based on specialization with mutual benefits for
the parties involved. Later, John Stuart Mill completed the contribution of the classical
authors, drawing attention to the Law of Reciprocal Demand, that is, the exchange ratio
is dependent on the reciprocal strength of the demands of each country in each product.
Although it is not the aim of this article to analyze the issue in depth, naturally, the
positions of the classical authors have been subject to much criticism over the past two
centuries; for example, specializing in one or another type of goods can have completely
different consequences in the long run (for illustrative purposes, see that certain products
correspond to a logic of increasing returns while others are in a decreasing returns drive,
that is, in the long run the specialization process led to its ultimate consequences, may
produce completely different results, i.e., unequal, as it was stressed by many authors,
such as Reinert, 2007). In any case, classical theories remained a major benchmark for
the internationalization process, both in terms of analysis and economic policy, although
many of its initial assumptions have also been relaxed and/or changed.
On the path opened by the classical authors, one of the main developments was the
emergence of the neoclassical theory of international trade during the first half of the XX
century, well exemplified by the Heckscher-Ohlin Theorem, which later had several
extensions. These authors gave up one of the basic classical hypotheses, considering two
factors of production, capital and labor, explaining the international specialization by the
endowment of each country in these factors. In the case of a greater abundance of one
factor (for example labor) relative to the other, the country should specialize in goods
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
82
intensive in that factor, insofar as, having a cost advantage determined by its abundance,
it was competitive (Santos, 2014).
Obviously, it is not our intention to present here in detail the development of these
theories and all the reformulations and critiques they have originated (which still prevail
in most international economics textbooks), but to show how the theories of
internationalization of economies and companies follow certain rules and principles,
which are essential for their good understanding. The same is also true for the case of
foreign direct investment, which has gained much prominence in recent decades.
Theories about capital movements, including FDI, developed later, as the classical
authors postulated the international immobility of this factor. This premise was accepted
for a long time, although this did not correspond entirely to the observed facts, even in
the most remote times. Thus, it was only since the 60s and 70s of the last century that
the theories on international capital movements emerged in a clear and autonomous way
and proved to be adherent to the flows actually registered (which are in fact very diverse
in nature from the financial ones to loans and direct investment). Within the scope of our
research and given its importance for a sustainable internationalization process of
companies, we will focus on two theories about FDI: the OLI (or Eclectic) Paradigm
formulated by John Dunning and the contribution of the Nordic School of Business.
The OLI Paradigm is a model developed by John Dunning during the 1970s, having been
the subject of constant reflection by the author between the 1970s and the beginning of
the XXI century (Dunning, 2000, 2001), which led to important adjustments and
clarifications. The term Eclectic comes from the fact that this Paradigm is based in a
combined manner on the three main areas in which FDI can be envisaged: the ownership
advantages (Ownership Advantages - O) that already exist in companies, or that may be
enhanced in their international expansion; the localization advantages (Localization
Advantages - L) that countries or international markets can offer with respect to moving
assets (for example, advantages arising from human or natural resources they have);
and the internalization advantages (Internalization Advantages - I), that correspond to a
trend of companies that have specific ownership advantages with the possibility of
combining the assets they have in different foreign markets, without going directly
through the market. Despite its eclecticism, in the author's view, this paradigm has some
limitations, firstly its focus is on multinational companies, and secondly because the
paradigm is limited to the interdependence of its OLI variables (Santos, 2014).
In this sense, there is another theoretical approach relevant to our study, especially with
regard to the internationalization of SMEs. The Nordic School of Business or Uppsala
School that sought to model the internationalization process of Swedish companies in the
1970s, concluding that it is based more on a gradual sequence (Johanson and Vahlne,
1977, 1990; Johanson and Wiedersheim-Paul, 1975). Thus, the internationalization
strategy of companies may have more or less steps, including “leaps” in their more likely
sequence during the internationalization process (Silva, 2002a: 61), recognizing,
however, that the main phases are: export, export agents, sales subsidiary, and
production subsidiary (Johanson and Vahlne 1990; Santos, 2014). According to this
model, in the initial stage of the internationalization process, basically characterized by
exports, companies tend to do business with countries or markets with a shorter "psychic
distance”
7
. In the most advanced stages of the internationalization process, especially in
the installation of a production branch, psychic distance is no longer such a determining
factor in companies' FDI strategy, rather, factors such as the size of the market, or its
specificities, with regard to the perceived attractiveness for FDI, which may be associated
7
The concept of psychic distance was developed by Vahlne and Wiedersheim-Paul in 1973, in a work in their
original language and later developed in other works such as in Hállen and Wiedersheim-Paul (1979). It is
the sum of all factors (language, culture, qualifications, political systems, history, corporate culture) that
can cause entropy in the communication, circulation and analysis of information between countries, markets
and companies, as there are deeper differences between the country of origin and the country receiving the
FDI.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
83
with factors such as customs tariffs, insertion in large economic areas, transportation
costs, or domestic purchasing power (Johanson and Vahlne, 1977, 1990; Johanson and
Wiedersheim-Paul, 1975).
Regarding SMEs, and in contrast to the critique that was previously addressed to the OLI
Paradigm (designed with big companies in mind, with vast resources, for example, with
property advantages that allow important gains in imperfect competition, or with
internalization advantages through their many branches around the world), the model of
the Nordic Business School is based on a theory that supports an explanatory model,
which takes into account the size and resources of SMEs, especially in the initial process
of their internationalization (Johanson and Vahlne, 1990).
More recently Johanson and Vahlne (2009) reflecting on the Uppsala School model,
highlighted the role of the Networks in the internationalization process, where companies
within the network benefit from a privileged context of communication and
interconnection, creating relationships in which learning and knowledge, business
opportunities, and synergies in the internationalization process, are shared (Raposo et
al., 2004). Taken as a whole, Johanson and Vahlne (2009) point us to yet another gap
to be filled in the initial model:
When we built our original model, we were not aware of the
importance of mutual commitment for internationalization. Now, our
vision is that successful internationalization requires a reciprocal
commitment between the company and its counterparts (Johanson
& Vahlne, 1990; Vahlne & Johanson, 2002) (Johanson and Vahlne,
2009: 1414).
To conclude this section, it should also be noted that recent empirical work has
contributed to clarify important theoretical issues related to the substance of our
research, i.e., international economic relations between countries with some degree of
cultural proximity in the broad sense. For example, gravitational models that initially
sought to explain international trade and investment by factors of a physical nature such
as geographical distance or else by the value of production, measured by the size of GDP
(Cechella et al., 2009: Cechella et al., 2012), showed limitations leading to the conclusion
that this type of influences is not as important today as it was in the past or was thought
to be (Eichengreen and Irwin, 1998), while factors such as language and historical and
institutional proximity have been gaining relevance having a role that should not be
underestimated in any way (Silva, 2005; Costa, 2005, Cechella et al., 2014). In addition
to other aspects, these considerations imply that the explanation of international flows
must also take into account the contribution of other scientific areas, such as history,
political science and international relations that study facts and dimensions that influence
many economic ties and partnerships that are established on a global scale.
3. The Ibero-American Market
3.1. The Socioeconomic nature
The Ibero-American Space is an important cultural and economic space that brings
together twenty-two states, nineteen on the American continent, being: Argentina,
Bolivia, Brazil, Colombia, Costa Rica, Cuba, Chile, Ecuador, El Salvador, Guatemala,
Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic, Uruguay,
and Venezuela, plus the three states that make up the Iberian Peninsula: Andorra, Spain,
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
84
and Portugal, with two languages of Latin origin - Portuguese and Castilian
8
. The
population of this space corresponds to about 9% of the world population, with an
expected increase of approximately 90% in the period from 1990 to 2030, from 477
million inhabitants to 748 million inhabitants. Being that it is subdivided into a ratio of
33.33% of the population of Portuguese-speaking countries, and 66.67% of the
population of Spanish-speaking countries, with a trend towards a slight increase in the
weight of the population of this language, because it has grown at a higher rate (Table
3).
Table 3 - Ibero-American Population *
* It includes all the countries in this space, located on the Iberian Peninsula or on the American
continent.
Source: UNCTADSTAT and handled by the authors themselves.
With regard to the economy of the Ibero-American Space, we can divide it into three
economic regions: Iberian countries, South American countries, and Central American
and Caribbean countries. The economic space as a whole showed a constant growth in
GDP and GDPpc in the two decades of 1990 and 2000, with the respective global GDP
growth of 34% and 33%. In the decade that started in 2010, however, there was a
slowdown of GDP within this space, with a similar impact on GDPpc as well as a reduction
of its share in terms of world output (Table 4).
Table 4 - Macroeconomic Data for the Ibero-American Space (GDP and GDPpc at constant 2010
prices)*
* Data include all the countries in this space, located in the Iberian Peninsula or the American
continent.
Source: UNCTADSTAT and handled by the authors themselves.
3.2. Ibero-American market analysis
The nature of the market in the three regions that make up the area is somewhat
different, especially between the American countries and the states that make up the
Iberian Peninsula. For the former, we can identify that there is a greater emphasis on
primary and extraction activities, as well as on construction, which reveals the relative
gap in the development of these regions, where the need to build infrastructure to
support economic activities is evident. Comparing with Portugal, we also note that in the
American Regions there is a much lower weight of manufacturing industries. These are
some of the conclusions that we can draw through a careful reading of Graphs 2 to 4.
8
As stated on the website of the Ibero-American General Secretariat, https://mandatos.segib.org/pt-br
[Consulted on 18/02/2019].
Years 1990 1995 2000 2005 2010 2015 2020 2025 2030
Total Ibero-American population (thousands) 477305 517790 556790 595009 632762 666003 697079 724788 748964
Percentage of the total population 8.95% 9.0% 9.06% 9.09% 9.09% 9.02% 8.94% 8.85% 8.75%
Portuguese-speaking countries as% of population 33.37% 33.30% 33.34% 33.19% 32.78% 32.49% 32.15% 31.79% 31.42%
Castilian-speaking countries in% of population 66.63% 66.70% 66.66% 66.81% 67.22% 67.51% 67.85% 68.21% 68.58%
Years 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015 2016 2017
Total GDP of the Ibero-American space (Thousands of dollars) 3827668 4392883 5132076 5863994 6831409 7043932 7147801 7280569 7359376 7386739 7339087 7433036
Growth rate (%) 14.77% 16.83% 14.26% 16.50% 3.11% 1.47% 1.86% 1.08% 0.37% -0.65% 1.28%
Percentage in relation to World GDP 10.06% 10.40% 10.25% 10.07% 10.33% 10.32% 10.22% 10.15% 9.98% 9.74% 9.45% 9.29%
GDP pc of the Ibero-American space (dollars) 7238 7631 8614 8907 9508 9690 9809 9948 10109 10274 10403 10604
GDP pc ratio of Ibero-American / World 1.014 1.039 1.057 1.070 1.049 1.043 1.039 1.043 1.044 1.042 1.032 1.024
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
85
Graph 2 - Distribution of Portuguese Economy Activities by Product - Year 2016
Source: PORDATA - 2019. Edited by the authors.
Graph 3 - Distribution of Economic Activities in Latin American countries by Product - Year 2017
Source: ECLAC - Latin American and Caribbean Yearbook, 2018. Edited by the authors.
Graph 4 - Distribution of Economic Activities in Caribbean Countries by Product - Year 2018
Source: ECLAC - Latin American and Caribbean Yearbook, 2018. Edited by the authors.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
86
According to what we referred to in the theoretical part, and analyzing the distribution of
production in the countries of Latin America and the Caribbean it can be concluded that
they have a strong endowment in natural resources, so it is not surprising that their
exports have a significant weight of products associated with raw materials, which makes
them very sensitive to fluctuations in their prices in international markets. For example,
the fall in the price of commodities in the mid-2010s was one of the factors that most
contributed to the poor economic performance in several countries in the region,
compared to the first decade of the XXI century.
3.3. International Cooperation in the Ibero-American Space
The integration process of the Ibero-American Space has several levels, since it is
subdivided by the set of international cooperation relations between states. Portugal and
Spain are on a higher level of integration, since they belong to the European Community
(since 1986), the European Union (since 1992 with the Maastricht Treaty), and the
Monetary Union (since 1999), making them partners for excellence with regard to most
of the international community policies, constituting in particular an important factor for
the development of the process of rapprochement between the European Union and the
Latin American countries (Trein and Guerra Cavalcanti, 2007). Indeed, the strong links
of the two Iberian countries to Latin America are one of the aspects that most value their
position in the European context. It is not surprising that the I Ibero-American Summit
9
was held in Guadalajara, Mexico in 1991, taking the first step in the process of integrating
the Ibero-American Space in its entirety, just a few years after Portugal and Spain joined
the European Community.
For its part, the Latin American Market is distinct from the point of view of the cooperation
and integration of the Regions of Central America and the Caribbean, and of South
America. We will now highlight the two most relevant cases from this point of view. In
1991, the Mercosur Treaty was signed, originally by four countries in South America:
Argentina, Brazil, Paraguay and Uruguay and later in 2012 Venezuela also joined,
appearing with the objective of promoting an integration logic, aiming at an enlarged and
deeper common market, that serves as a platform for the participation of these states in
the global market under more favorable conditions (Diz and Luquini, 2011; Kegel e Amal,
2013). More recently in 2012, the Pacific Alliance was created, “composed by Colombia,
Peru, Chile and Mexico, which brings together countries with very close international
patterns, guided by trade liberalization and the signing of free trade agreements with
developed and developing countries” (Bressan and Luciano, 2018: 74).
Regarding institutional relations between the European Union and Latin America,
reference should also be made to the “signing of the Interregional Agreement between
the EU and Mercosur, with the aim of covering trade and economic issues, cooperation
on integration and other areas of mutual interest, in order to strengthen relations
between the two regions” (Santos, 2014: 24)
10
. However, and according to Diz and
Luquini (2011), there has not been a great evolution in the integration of these two
spaces, and over the past two decades there were some advances, but numerous
obstacles to the process were also raised. However, and more recently, the European
Union and Mercosur signed a new agreement on 28 June 2019, which could lead to deeper
economic integration between these two spaces, that is, as reported, “today they reached
a political agreement with a view to an ambitious, balanced and comprehensive trade
9
XXVI Summits (Cumbres) have been held so far, and the Ibero-American Cooperation Secretariat was
established at the IX Summit in Havana, Cuba in 1999 (SECIB). Organ that stipulates the true institutionality
of the Ibero-American system (Freres, 2005).
10
Interregional Agreement signed in 1995, however, it was only approved by the Council of European Ministers
in 1999.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
87
agreement. The new commercial framework — which is part of a wider association
agreement between the two regions — will consolidate a strategic partnership at the
political and economic level and create important sustainable growth opportunities for
both parties”
11
. Regardless of this step forward, it should be remembered that the process
leading to a greater degree of free trade between the EU and Mercosur was launched in
the 1990s and the results to date have been scant,
12
so the new agreement must be
monitored with caution, especially since important doubts persist about its
implementation from both sides.
3.4. Portugal and the Latin American market
It is also necessary to make a brief analysis of the economic relations between Portugal
and the Latin American countries.
As we have already mentioned, exports have recently been determinant for the
development of the Portuguese economy, the country has been experiencing a
consolidated growth where we can see that the weight of exports in relation to Portuguese
GDP grew significantly. Table 1 showed that in 2010, the weight of exports (goods and
services) in GDP was 30.1%, and that, in 2018, it was expected to reach a value of
43.3% of GDP, which corresponds to an effective transformation of the Portuguese
tradable economy. With regard to the exports of goods (those that have the greatest
weight in the group), they present some diversification of the products supplied by the
industry, since there is not an excessive concentration in one or two main products. Thus,
we can identify the main products exported by Portugal in 2017, as a percentage of total
exports: Refined Petroleum Products (4.7%), Motor Vehicles (4.2%), Automotive
Components (4.1%), Leather Shoes (3.5%), Uncoated Paper (1.9%), Tire Rubber
(1.8%), Packaged Medicines (1.7%), Seats (1.7%), Knitted Sweaters (1.4%), Wine
(1.4%). These ten products are equivalent to about 26.4% of total Portuguese exports.
13
Looking now at exports to the Latin American market, we find that this space does not
have a large weight in the total of Portuguese exports, having varied between 3.1% and
4% in the last decade (Graph 5). On the other hand, and according to Table 5, in the
region, the main destination countries for Portuguese exports are: Brazil with a weight
between 1.26% and 1.73%; Mexico between 0.65% and 0.97%; Argentina between
0.15% and 0.36%; Chile between 0.18% and 0.27%; Colombia, which grew in this
decade from 0.06% in 2010 to 0.18% in 2016; finally, Venezuela, a country where a vast
community of the Portuguese diaspora lives, but that, in recent years, has been going
through a deep economic crisis, with direct repercussions on Portuguese exports. Indeed,
we can see that Venezuela absorbed 0.64% of national exports in 2013, and that it does
not go beyond 0.02% in 2017. Despite the fact that the Ibero-American market does not
have a very significant weight in Portuguese exports, it should not be neglected, quite
the opposite, as it is a market that allows an expansion of Portuguese foreign trade. Due
to its Latin linguistic and cultural proximity, including migration movements, whose
influence we have referred to in the theoretical part, but also to the size and potential of
the market itself, both factors put Latin American countries as an important space in
future Portuguese internationalization strategies.
11
https://ec.europa.eu/commission/presscorner/detail/pt/ip_19_3396 [Consulted on 12/07/2019]
12
For an analysis of the initial phase of this process and the main problems that arose since its very beginning,
as well as its permanence and difficult resolution, see for a broader development chap. 3 of Silva, 2002b:
161-202.
13
According to the data collected from Observatory of Economic Complexity (OEC) -
https://atlas.media.mit.edu/pt/profile/country/prt/ [Consulted on 08/04/2019].
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
88
Graph 5 – Weight of the Ibero-American Space in Total Portuguese Exports from 2010 to 2017
Source: Observatory of Economic Complexity (OEC) – 2019. Edited by the authors.
In this regard, it is worth mentioning the example of Spain, which is currently the main
foreign market of Portugal with a share from 1/4 to 1/5 of national exports (Graph 5)
because in the last 50 years this bilateral trade witnessed a radical transformation. In
1968, Spain represented no more than 1.5% of Portuguese exports, only having a
significant weight after the EEC membership, in 1986, in the year of 1988 the neighboring
country reached a weight of 11.2% and in 1991 of 14.9% (Silva, 1993: 182). This
example demonstrates that economic relations between states are not static, and that
often depend on internationalization strategies and institutional relations between
countries, hence we consider that just like the Spanish case in the last half century, the
Ibero-American market may come to play an important role in future Portuguese
internationalization strategies, with important effects in terms of the orientation of
companies and their preparation.
Table 5 – Portuguese Exports to the Latin American Space (as a percentage of total Portuguese
exports).
2010
2011
2012
2013
2014
2015
2016
2017
Spain
23%
23%
20%
21%
21%
22%
22%
21%
Latin-America
3.5%
3.4%
3.9%
4%
4%
3.7%
3.1%
3.7%
Argentina
0.20%
0.15%
0.19%
0.36%
0.18%
0.32%
0.16%
0.23%
Bolivia
0.004%
0.01%
0.01%
0.01%
0.02%
0.03%
0.01%
0.02%
Brazil
1.26%
1.46%
1.7%
1.69%
1.73%
1.45%
1.18%
1.68%
Chile
0.29%
0.21%
0.22%
0.18%
0.23%
0.23%
0.25%
0.26%
Colombia
0.06%
0.09%
0.13%
0.10%
0.16%
0.16%
0.18%
0.12%
Costa Rica
0.03%
0.02%
0.02%
0.02%
0.02%
0.03%
0.03%
0.01%
Cuba
0.05%
0.05%
0.10%
0.07%
0.07%
0.09%
0.09%
0.08%
Dominican Republic
0.02%
0.02%
0.03%
0.03%
0.03%
0.04%
0.04%
0.05%
Ecuador
0.03%
0.03%
0.03%
0.07%
0.05%
0.1%
0.07%
0.04%
El Salvador
0.02%
0.02%
0.02%
0.02%
0.03%
0.03%
0.02%
0.03%
Guatemala
0.01%
0.01%
0.01%
0.02%
0.02%
0.04%
0.03%
0.03%
Honduras
0.01%
0.01%
0.01%
0.01%
0.01%
0.01%
0.01%
0.01%
Mexico
0.97%
0.88%
0.64%
0.61%
0.75%
0.70%
0.71%
0.94%
Nicaragua
0.002%
0.002%
0.005%
0.004%
0.004%
0.005%
0.004%
0.01%
Panama
0.018%
0.02%
0.04%
0.03%
0.04%
0.04%
0.04%
0.04%
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
89
Paraguay
0.005%
0.04%
0.05%
0.06%
0.046%
0.03%
0.03%
0.04%
Peru
0.06%
0.06%
0.08%
0.08%
0.08%
0.1%
0.08%
0.08%
Uruguay
0.02%
0.02%
0.03%
0.04%
0.09%
0.03%
0.02%
0.02%
Venezuela
0.44%
0.30%
0.59%
0.64%
0.44%
0.27%
0.15%
0.02%
Source: Observatory of Economic Complexity (OEC) – 2019. Edited by the authors.
4. Analysis of the Internationalization of Portuguese SMEs to the Latin
American Space
4.1. The empirical survey and its methodology
As part of this work, in June 2014, a survey was carried out on Portuguese SMEs, in order
to characterize their internationalization process for Latin America, which results are
presented and analyzed in this section. We started from a database of SMEs and
exporters to Latin American countries of 5872 companies as the universe of the study.
This total was reached by joining a list of excellence SMEs in the year 2013 from IAPMEI
with 3920 companies, and a database of companies exporting to the Central and South
American markets of AICEP with 1952 companies. In the development of the research,
we also counted on the precious help of business associations that participated in the
survey and disclosed it to their associates.
We obtained responses from 107 companies, corresponding to 1.8% of the universe's
population, of which 50 questionnaires were validated within the parameters of the study
(0.85% of the population), for being SMEs according to the criteria mentioned above and
for being internationalized to Latin America.
The survey was divided into four categories of questions: I - Company data, II - Export
profile of the SME, III - Outline of the international investment profile of the SME, IV-
Outline of the internationalization process and assessment of the institutional role. In
preparing the inquiry, we took as a base the survey prepared by Simões (2010), and
adapted to the study of SMEs by Silva and Simões (2012), which was complemented with
new questions, aimed at obtaining data on the assessment of organizations, following
the methodologies of Hill and Hill (2008) and Manheim et al. (2007). SPSS (version 22)
was also used to perform tabulation, coding and analysis of information, based on a
descriptive analysis of frequencies.
4.2. Outline of the profile of SMEs and their internationalization
Most of the companies that compose the sample come from 5 districts of the coast of
Portugal (Porto, Aveiro, Lisbon, Leiria and Setúbal), which correspond to 76% of the
total. Most of these companies are connected to the manufacturing industries, 64%, and
most companies have an equity capital over 100 thousand euros, 69.4%. From the point
of view of jobs, we identified that 88% of the SMEs surveyed have more than 10 workers.
We could also observe that in the international activity, 70% of the companies are
orientated to export, 16% export and make direct investment, and that 14% maintain
another type of international activity, such as partnerships.
From the point of view of consolidating the internationalization of companies, the results
of the survey show that two thirds have had international activity for more than ten
years, i.e., 66%. Regarding the importance of international activity in the invoicing of
companies, we found that the weight was greater than 50% of the total in 40% of the
sample, and between 25 to 50% of the total in 23% of the sample. Regarding the type
of presence in the countries to which they export, through Table 6, we can see that the
most frequent way is the "direct approach to the customer" (28%), followed by 'no
presence' (8%), the existence of an 'agent' (8%), and a 'network of distributors” (8%).
Table 6 – Types of External Presence
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
90
Types of Presence
Frequency
Percentage
Cumulative
percentage
Direct Customer Approach
14
28%
28%
No presence
4
8%
36%
Agent
4
8%
44%
Distributor Network
4
8%
52%
Agent and Direct Customer Approach
3
6%
58%
Agent Network, Direct Customer Approach
3
6%
64%
Distributor Network, Direct Customer Approach
3
6%
70%
Agent, Agent Network, Distributor Network
2
4%
74%
Subsidiary / Branch
2
4%
78%
Agent, Agent Network, Direct Customer Approach
1
2%
80%
Agent, Agent Network, Distributor Network, Direct Customer
Approach
1
2%
82%
Agent, Distributor Network
1
2%
84%
Agent, Distributor Network, Direct Customer Approach
1
2%
86%
Agent, Distributor Network, Subsidiary / Branch
1
2%
88%
Agent, Distributor Network, Subsidiary / Branch, Direct
Customer Approach
1
2%
90%
Subsidiary / Branch, Direct Customer Approach
1
2%
92%
Displaced service provision
1
2%
94%
Agent Network
1
2%
96%
Agent Network, Distributor Network, Direct Customer
Approach
1
2%
98%
Tourism
1
2%
100%
Total
50
100%
Respecting the (export) activities that have already been carried out, it was found that
the country most mentioned by companies was Brazil (31% of the mentions), followed
by Colombia (16%), Mexico (12%), Chile (10%), Argentina (7%), and Uruguay (7%),
and they still export irregularly to ten other countries and seven others are not even
mentioned (Table 7). However, we found that 47% of the companies expressed interest
in exporting in the future to Latin America, with special relevance to Colombia (13%),
Brazil (10%) and Mexico (8%) (Table 8).
Table 7 - Latin American Countries to which they Export?
Country
Total Mentions
1st Position
2nd Position
3rd Position
Frequency
Percentage
Frequency
Percentage
Frequency
Percentage
Frequency
Percentage
Brasil
18
31%
16
57%
1
5%
1
8%
Colombia
9
16%
2
7%
4
18%
3
23%
Mexico
7
12%
4
14%
2
9%
1
8%
Chile
6
10%
4
14%
1
5%
1
8%
Argentina
4
7%
1
4%
2
9%
1
8%
Uruguay
4
7%
0
0%
2
9%
2
15%
Honduras
2
3%
0
0%
2
9%
0
0%
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
91
Country
Total Mentions
1st Position
2nd Position
3rd Position
Frequency
Percentage
Frequency
Percentage
Frequency
Percentage
Frequency
Percentage
Peru
2
3%
0
0%
1
5%
1
8%
Venezuela
2
3%
0
0%
1
5%
1
8%
Costa Rica
1
2%
0
0%
0
0%
1
8%
El Salvador
1
2%
1
4%
0
0%
0
0%
Panama
1
2%
0
0%
1
5%
0
0%
Paraguay
1
2%
0
0%
0
0%
1
8%
Bolivia
0
0%
0
0%
0
0%
0
0%
Cuba
0
0%
0
0%
0
0%
0
0%
Ecuador
0
0%
0
0%
0
0%
0
0%
Guatemala
0
0%
0
0%
0
0%
0
0%
Haiti
0
0%
0
0%
0
0%
0
0%
Nicaragua
0
0%
0
0%
0
0%
0
0%
Dominican Republic
0
0%
0
0%
0
0%
0
0%
Total Validated
58
100%
28
100%
17
77%
13
100%
Others without indication
15
5
15%
5
23%
5
28%
Total
73
33
22
18
Jamaica
1
0
Guyana
1
From the point of view of FDI, we note that its importance is reduced when compared to
exports. In this sense, only 46% companies of the sample responded to the survey, but
we were still able to identify the following: 65% of these companies hold FDI in Latin
America for less than 2 years. The weight of these investments is still low as for 44% of
respondents it is less than 5% of the billing, and with an accumulated value of 88% of
companies where the weight is less than 25% of the billing. In terms of the countries
receiving FDI, out of the 20 possible, it appears that only 8 countries attracted direct
investment by the companies surveyed, where Brazil stands out (22%), Argentina
(11%), Chile (11%), Colombia (11%), Costa Rica (11%), Mexico (11%), Panama (11%),
and Peru (11%). In answering the question about the interest in future FDI movements,
only 18% of possibilities for investments in Latin America were considered, with the
remaining 82% in several countries on other continents.
Table 8 - Future Exports for Countries in the General Context
Country
Total Mentions
1st Position
2nd Position
3rd Position
Frequenc
y
Percentag
e
Frequenc
y
Percentag
e
Frequenc
y
Percentag
e
Percentag
e
Frequenc
y
Colombia
8
13%
3
13%
3
14%
2
12%
Brazil
6
10%
5
21%
1
5%
0
0%
EUA
5
8%
3
13%
1
5%
1
6%
Mexico
5
8%
0
0%
3
14%
2
12%
Germany
4
6%
1
4%
1
5%
2
12%
France
3
5%
0
0%
3
14%
0
0%
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
92
Country
Total Mentions
1st Position
2nd Position
3rd Position
Frequenc
y
Percentag
e
Frequenc
y
Percentag
e
Frequenc
y
Percentag
e
Percentag
e
Frequenc
y
Russia
3
5%
2
8%
0
0%
1
6%
Angola
2
3%
1
4%
1
5%
0
0%
Argentina
2
3%
1
4%
0
0%
1
6%
Spain
2
3%
1
4%
0
0%
1
6%
Panama
2
3%
1
4%
1
5%
0
0%
Peru
2
3%
2
8%
0
0%
0
0%
Poland
2
3%
0
0%
1
5%
1
6%
Uruguay
2
3%
0
0%
0
0%
2
12%
Saudi Arabia
1
2%
0
0%
0
0%
1
6%
Belgium
1
2%
1
4%
0
0%
0
0%
Belize
1
2%
0
0%
1
5%
0
0%
Cape Verde
1
2%
1
4%
0
0%
0
0%
Chile
1
2%
1
4%
0
0%
0
0%
China
1
2%
0
0%
1
5%
0
0%
South Korea
1
2%
0
0%
1
5%
0
0%
Holand
1
2%
0
0%
1
5%
0
0%
Indonesia
1
2%
0
0%
0
0%
1
6%
Mozambique
1
2%
0
0%
1
5%
0
0%
Norway
1
2%
0
0%
0
0%
1
6%
Paraguay
1
2%
0
0%
1
5%
0
0%
United
Kingdom
1
2%
0
0%
0
0%
1
6%
Trinidad and
Tobago
1
2%
1
4%
0
0%
0
0%
Total
62
100%
24
100%
21
100%
17
100%
Latin
America
29
47%
13
54%
9
43%
7
41%
Other
Regions
33
53%
11
46%
12
57%
10
59%
4.3. Evaluation of the internationalization process and of the Portuguese
Institutions that provide support
Other relevant aspects for the internationalization process were also inquired, namely,
what are the preferential forms of approach? What are their motives? What are the main
obstacles to the process?
In terms of the preferential forms of approach, we identified that the main were
«Displacement and direct contact » (74%), and “Participation in fairs" (68%). Regarding
the motives, the most mentioned was “Increase in market share” (82%), followed by
“Notoriety and recognition in the national market” (30%) and “Proximity to customers »
(28%) (Table 9). As for the obstacles identified in the process, the most relevant were
the “Bureaucratic aspects" (64%), as the second most frequent reason is the “Lack of
incentives” (34%), following in third position, simultaneously, the “Difficulty to obtain
financing” and the “Lack of information" (22%). A still relevant reason is the "Difficulty
of access to institutions" (18%).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
93
Table 9 - Main Motives for Internationalization?
Yes
No
Motives for internationalization
Frequency
Percentage
Frequency
Percentage
Total
Increased market share
41
82%
9
18%
50
Notoriety and recognition in the national market
15
30%
35
70%
50
Resource search
7
14%
43
86%
50
Proximity to customers
14
28%
36
72%
50
Fairer product valuation
1
2%
49
98%
50
Presence of a foreign community in the company's
region
1
2%
49
98%
50
The companies also carried out an evaluation of the main institutions that, in Portugal,
give support to the internationalization process, from Bad (score 1) to Very Good (score
5), reserving a score of 3 for cases in which the company does not know or does not
respond (position of indifference). The results are showed in Table 10: the
Business/Commercial Associations are the highest scored (165 points), followed by
Chambers of Commerce (152 points), IAPMEI (151 points), AICEP and
Embassies/Consulates (140 points) and finally the Government (122 points). It is
interesting to note that the responding firms value professional organizations such as
business associations and chambers of commerce more than government bodies like
AICEP, embassies/consulates (or the government), the latter being specifically formed
or dedicated to the purpose.
Table 10 – Assessment of Institutions
AICEP
Business/Trade
Associations
Chambers of
Commerce
Embassies/
Consulates
Government
IAPMEI
Bad (1)
16
5
8
15
16
5
Reasonable
(2)
9
14
7
4
3
13
Good (4)
13
11
7
4
3
12
Very Good
(5)
9
14
9
10
2
6
NS/NR (3)
3
6
19
17
26
14
Score
140
165
152
140
122
151
Companies were also asked to suggest improvements to institutions. Of the 50
companies, 24% presented suggestions, which were summarized in Table 11.
Table 11 – Companies' Suggestions for Improving the process
Summary of Suggestions
• Have an organized and credible dossier by markets with potential buyers so that
companies can make the contacts
• Simplification of processes
• Create representations manager, hold meetings with commercial attachés of
embassies who do not want only the prestige of the name of the position, look for the
main purchasing managers in companies with placement capacity, etc. Anyway,
anything that is not passive, reactionary and lethargic
• In some markets, more human and financial resources are needed for the local
support of companies
• Ability to streamline processes and facilitate financing for SME projects
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
94
Finally, it was important to know what is the assessment that companies have of their
own internationalization process, with only 6% of companies considering their experience
as unsatisfactory (Table 12). The remaining companies, with the exception of 6% who
have no opinion, considered the experience as positive, albeit to varying degrees. It
should be noted that 42% rate the experience as good and 16% as very good.
Table 12 - How do you Evaluate your Internationalization Experience?
Frequency
Percentage
Cumulative percentage
Unsatisfactory
3
6%
6%
Satisfactory
15
30%
36%
No opinion
3
6%
42%
Good
21
42%
84%
Very good
8
16%
100%
Total
50
100%
5. Conclusions
This work aimed to carry out a political and economic analysis of the internationalization
of the Portuguese economy to Latin America, focusing on the role of SMEs. We first saw
how SMEs are a major driver of the Portuguese economy, both in terms of their number
and the weight they have on gross added value and employment. The recessionary
climate of the Portuguese economy in the early 2010s made the need for going
international imperative. It is in this context that we intend to assess how Latin America,
an area where there is linguistic and historical proximity (just remember the great
migration currents of the past) prove to be an international destination of significance for
Portuguese SMEs.
In the light of the internationalization theories that we focused on the theoretical section,
we tried to identify the contours of this process, for example, testing the relevance of
some concepts such as Psychic Distance. In this sense, it was possible to confirm that
the Ibero-American market is not very expressive in the Portuguese exports as it did not
correspond, on average of the years 2010-2017, to more than 3.7% of the total. Even
so, and from the responses to the survey, we found that the Latin American space should
be taken seriously into consideration in the further steps towards internationalization of
Portuguese SMEs, insofar it corresponds to 47% of the companies' intentions of
exportation.
In an evaluation of the internationalization process of the SMEs that were surveyed, we
can identify that they present a behavior somewhat similar to the process suggested by
the Theory of the Nordic School of Business, i.e., a “gradual process of
internationalization”. Since most companies (about 70%) are only dedicated to exports,
and directly looking for the customer, we note a residual number of companies that have
an "agent" or a "distribution network". With regard to FDI, we confirmed that few
companies in the sample invested in Latin America, which for the case of SMEs should
not be surprising given what we referred to above regarding their access to resources,
namely financial and human resources. Considering another recent survey (Return on
Ideas, 2018), it corroborates the analysis we presented earlier with regard to the
internationalization of Portuguese SMEs into the world market. Actually, it states that
direct exports to international customers (61%), occasional exports (25%), and exports
through international agents (16%) are the main forms of internationalization for
Portuguese SMEs, while the use of FDI by these companies is residual, taking the form
of its own branch and/or subsidiary (9%) and the presence abroad is rarely translated
into production/manufacturing units (1%).
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
95
Despite the profile that has just been traced, it must be underlined that the importance
of the international component in the turnover is quite significant for the companies that
responded to the inquiry, showing that SMEs are in a process of gradual growth towards
internationalization, eventually in the future making even medium and long term
investments abroad, thus providing a continuous learning process. This will require the
existence of international strategies and operations, which are necessary and correspond
to needs, not even excluding investments. Taking into account this analysis, the self-
assessment carried out by the companies seems consistent.
This work is far from being the end of the research carried out, it is rather another step
in the investigation on the internationalization of the Portuguese economy and firms, to
an important world region, where they can benefit from advantages, if their action is
adequate and they know well the ground (of course, presumed cultural proximity is not
enough per se). Thus, we have in mind the pursuit of this research, developing the theme
of the internationalization of SMEs to Latin America, expanding the sample, and
complementing it with case studies, which would allow to go beyond the limits that a
survey carried out in a given year, although recent, necessarily has. Such an approach
would lead to a more longitudinal view of the analyzed process, allowing stronger
conclusions. Another issue raised by this research is that of an empirical study comparing
in depth the Portuguese case, with the process of Spanish SMEs for the same economic
space, assessing similarities and differences and their causes and implications.
References
Bressan, R. N., and Luciano, B. T. (2018). «A Comunidade Andina no século XXI: entre
bolivarianos e a Aliança do Pacífico». Revista de Sociologia e Política, 26(65), 62 to 80.
Cechella, C., Dentinho, T., and Silva, J. R. (2012). «World centralities for political,
demographic and market purposes». Letters in Spatial and Resource Sciences, Vol. 5, 2,
July, 73 to 83.
Cechella, C., Franco, G. H. B., Silva, J. R., and Dentinho, T. P. (2014). «New Dimensions
of Brazilian Economy Internationalization: Portugal as a strategic location for EMBRAER’s
investments and their impact on the regional economy». Revista Portuguesa de Estudos
Regionais, 35, 3 to 13.
Cechella, C., Silva J. R., and Dentinho, T. P. (2009). «Explaining trade and FDI
relationships in a gravitational model». Studies in Regional Science, Vol. 39, 1, 41 to 52.
CEPAL (2018). Panorama Económico y Social de la Comunidad de Estados
Latinoamericanos y Caribeños, 2017. Santiago: Comisión Económica para América Latina
y el Caraíbas (CEPAL).
CEPAL (2019). Anuario Estadístico de América Latina y el Caraíbas, 2018. Santiago:
Comisión Económica para América Latina y el Caraíbas (CEPAL).
Costa, C. G. (2005). A Cultura como Fator Dinamizador da Economia: Os Investimentos
Portugueses no Brasil. Lisboa: Instituto Superior de Ciências Sociais e Políticas –
Universidade Técnica de Lisboa.
Diz, J., and Luquini, R. (2011). «As relações exteriores do Mercosul: análise das
negociações com a União Europeia». Universitas Relações Internacionais, 9(1), 103 to
130.
Dunning, J. H. (2000). «The Eclectic Paradigm as an Envelope for Economic and Business
Theories of MNE Activity». International Business Review, Vol. 9, 2, 163 to 190.
Dunning, J. H. (2001). «The Eclectic (OLI) Paradigm of International Production: Past,
Present and Future». International Journal of the Economics of Business, Volume 8, 2,
173
to 190.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
96
Eichengreen, B., and Irwin, D. (1998). «The Role of History in Bilateral Trade Flows». In
J. A. Frankel, Ed., The Regionalization of the World Economy. Chicago: NBER/University
of Chicago Press, 33 to 67.
European Commission (2010). «Internationalization of European SMEs».
Entrepreneurship Unit, Directorate-General for Enterprise and Industry, of European
Commission.
Farinha, L., and Félix, S. (2014). «Uma Análise de Restrições de Financiamento às PME
Portuguesas». Artigos de Estabilidade Financeira, Banco de Portugal. November, 1 to 27.
Freres, C. (2005). «La Corta Historia de las Cumbres: 1991-2004». In Arenal, C. D.
(Coord.), Las Cumbres Iberoamericana (1991-2005). Logros e Desafios. Madrid:
Fundación Carolina, 1 to 26.
Hallén, L., and Wiedersheim-Paul, F. (1979). «Psychic distance and buyer-seller
interaction». Originally published in Swedish and then translated into P. J. Buckley and
P. N. Ghauri, Eds, The Internationalization of the Firm: A Reader, 2nd edition (1999).
London: International Thomson Business Press, 349 to 360.
Hill, A., and Hill, M. M. (2008). Investigação por Questionário (2a Edição). Lisbon: E.
Sílabo.
INE (2018). Estatísticas das Empresas 2016. Lisboa. Instituto Nacional de Estatística, I.
P.
Johanson, J., and Vahlne, J.-E. (1977). «The Internationalization Process of the Firm - A
Model of Knowledge Development and Increasing Foreign Market Commitments». Journal
of International Business Studies, Volume 8, 1, 23 to 32.
Johanson, J., and Vahlne, J.-E. (1990). «The Mechanism of Internationalization».
International Marketing Review, 11 to 24.
Johanson, J., and Vahlne, J.-E. (2009). «The Uppsala Internationalization Process Model
Revisited: From Liability of Foreignness to Liability of Outsidership». Journal of
International Business Studies, 40, 1141 to 1431.
Johanson, J., and Wiedersheim-Paul, F. (1975). «The Internationalization of the Firm -
Four Swedish Cases». Journal of Managements Studies, Vol. 12, 3, 305 to 323.
Kegel, P. and Amal, M. (2013). «Perspectivas das negociações entre o Mercosul e a União
Europeia em um contexto de paralisia do sistema multilateral e da nova geografia
econômica global». Revista de Economia Política, 33(2), 341 to 359.
Manheim, J. B. et Al (2007). Empirical Political Analysis Quantitative and Qualitative
Research Methods (7th Edition). London: Longman.
Raposo, M. B., Silva, J. R., and Viana, C. (2004). «Internacionalização: uma abordagem
na ótica da teoria das redes e dos recursos». Revista Portuguesa de Marketing, Year 8,
Vol. 1, 16, 55 to 66.
Return on Ideas (2018). Um Olhar Sobre a Internacionalização das PME. Lisbon. Câmara
de Comércio e Indústria Portuguesa.
Reinert, E. R. (2007). How Rich Countries Got Rich ... and Why Poor Countries Stay Poor.
London: Constable
Ricardo, D. (1821). On the Principles of Political Economy and Taxation. Library of
Economics and Liberty. Retrieved May 20, 2014. [Consulted on 25/02/2019]. Available
at http://www.econlib.org/library/Ricardo/ricP.html.
Santos, A. F. F. E. B. (2014). Fatores institucionais na internacionalização das PMEs
portuguesas para a América Latina. Dissertação de Mestrado. Instituto Superior de
Economia e Gestão - Universidade de Lisboa
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.77-97
The importance of Latin American space in the internationalization of Portuguese SMEs
André Brás-dos-Santos; Joaquim Ramos Silva
97
Silva, J. R. (1993). «Desencontros e Caminhos de Convergência». In José Calvet de
Magalhães, Álvaro de Vasconcelos e Joaquim Ramos Silva (ed.), Portugal Paradoxo
Atlântico: Diagnóstico das Relações Luso-Americanas. Lisboa: Fim do Século edições, 99
to 196.
Silva, J. R. (2002a). Estados e Empresas na Economia Mundial. Lisboa: Editora Vulgata.
Silva, J. R. (2002b). Portugal/Brasil: Uma Década de Expansão das Relações Económicas,
1992-2002. Lisbon: Editora Terramar.
Silva, J. R. (2005). «A Internacionalização das Empresas Portuguesas: A Experiência
Brasileira». RAE - Edição Especial Minas Gerais, Vol. 45, Special Minas Gerais, 102 to
115.
Silva, J. R. (2008). Internationalization Strategies in Iberoamerica: The case of
Portuguese trade. Economic Commission for Latin America and the Caribbean (ECLAC) –
Project Documents collection. Santiago do Chile: United Nations Publication.
Silva, J. R., Simões, C. C. (2012). «Portuguese Exports and FDI: Observations from the
firms’ perspective». China-USA Business Review, Vol. 11, 6, June, 820 to 835.
Silva, J. R. (2019). «A economia portuguesa após 2015: O triunfo incerto do modelo
improvável». In Allan Claudius Queiroz Barbosa e Cristina Parente (Orgs), Sociologia,
Gestão e Economia: Diálogos transversais entre Portugal e o Brasil. Curitiba: Editora
CRV, 59 to 81.
Simões, A. C. (2010). Internacionalização das Empresas Portuguesas: Processos e
destinos. Masters dissertation. Lisbon: Instituto Superior de Economia e Gestão,
Universidade Técnica de Lisboa.
Trein, F., and Guerra Cavalcanti, F. (2007). «Uma análise crítica do acordo de associação
estratégica entre a União Européia e a América Latina e as Caraíbas - A Cúpula de
Viena». Revista Brasileira de Política Internacional, 50(1), 66 to 85.
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 98-111
ENTREPRENEURSHIP AND ECONOMIC GROWTH:
THE MEDIATION ROLE OF ACCESS TO FINANCE
Mohsen Mohammadi Khyareh
m.mohamadi@ut.ac.ir
Assistant professor, department of administrative and economic science,
Gonbad-e Kavous University (Iran)
Abstract
The purpose of this paper is to examine the mediating role of finance in the relationship
between economic growth and entrepreneurship in a sample of 17 OIC countries. We
developed a model where banking finance as a proxy for Access to finance mediates the
relationship between the total early stage entrepreneurship (TEA) as a proxy for
entrepreneurship and economic growth. Correlation, Baron and Kenny approach (causal steps
approach) and PROCESS Macro (normal test theory) developed by Hayes were used to find
out the direct and indirect effects of financing between entrepreneurship and economic
growth. The bootstrap mediation results indicated that finance was a significant predictor of
entrepreneurship and entrepreneurship was a significant predictor of economic growth. These
findings support the mediation hypothesis. In addition, findings showed that there is a positive
relation between entrepreneurship and economic growth and a positive relation between
finance and economic growth in OIC countries. Furthermore, the findings of this study indicate
that the total association between entrepreneurship and economic growth in OIC countries is
not only direct, but also that entrepreneurship contributes to levels of economic growth
through the increased levels of finance. As a result, countries with higher levels of access to
finance tended to experience entrepreneurship at higher levels, which in turn contributed to
the emergence of increased levels of economic growth. The results indicated that the direct
effect of entrepreneurship on the economic growth remained significant when controlling for
finance, thus suggesting partial mediation. In other words, finance only mediates part of the
effect of entrepreneurship on economic growth.
Keywords
Finance, Entrepreneurship, Economic growth, mediation effect
How to cite this article
Khyareh, Mohsen Mohammadi (2020). "Entrepreneurship and Economic growth: the
mediation role of finance ". JANUS.NET e-journal of International Relations, Vol. 11, N.º 1,
May-October 2020. Consulted [online] on the date of the last visit,
https://doi.org/10.26619/1647-7251.11.1.7
Article received on September 3, 2019 and accepted for publication on February 28, 2020
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
99
ENTREPRENEURSHIP AND ECONOMIC GROWTH:
THE MEDIATION ROLE OF ACCESS TO FINANCE
Mohsen Mohammadi Khyareh
1- Introduction
Entrepreneurship is generally seen as an essential stimulus for economic growth through
the environment. It is therefore considered essential to recognize the role of
entrepreneurship in achieving economic progress factor for recognizing the progress of
society (Al-Sokari et al., 2014). A growing body of research has shown positive
entrepreneurship impacts on a variety of economic indicators, including investment and
foreign direct investment (Goel, 2018), productivity (Williams & Thompson, 1998),
equality of income and wealth (Lippman et al., 2005; Packard) & Bylund, 2018), human
capital development (Martin et al., 2013; Marvel et al., 2016) and exports (Cumming et
al., 2014). In addition, previous empirical studies have looked at the relationship between
entrepreneurship and economic growth (Wennekers & Thurik, 1999; Audretsch et al.,
2006; Carree & Thurik, 2010; Valliere & Peterson, 2009; Baumol & Strom, 2007). They
argue that entrepreneurship can make a significant contribution to economic growth by
serving as a means to innovate, disseminate knowledge, increase competition and
increase diversity. Furthermore, most studies used direct relationships to confirm the
impact of entrepreneurship on economic growth. Some of them have demonstrated the
significant impact of entrepreneurship on economic growth (Baumol 1990, Kreft & Sobel,
2005; Nyström, 2008; Parker, 2018), while some studies have shown insignificant
influence of entrepreneurship on economic growth (Caree et al., 2007). From the above,
empirical studies show mixed results on the role of entrepreneurship in economic growth
due to the diversity of types of entrepreneurship, but also on the characteristics of the
macroeconomic environment in which economic growth takes place.
Some contributions dealt with the nature and scope of the relationship between finance
and economic growth (Allen et al., 2005; Law & Singh, 2014). The role of the financial
system for economic development has received increasing attention from academics and
policymakers (Ndikumana 2001), leading to different views. The focus on this area has
increased in recent decades, with mixed results remaining a theoretical and empirical
controversy (Boulika and Trabelisi 2002). The main reason why finance is important is
that financial development and brokerage has proven empirically to be a major driver of
economic growth and development. There is evidence that this process not only leads to
economic development but can also play a positive role in reducing poverty and income
inequality. Despite their key role in advancing efficiency and equality in society, 2.7 billion
people (70% of the adult population) in emerging markets still do not have access to
basic financial services, and a large proportion of them come from countries with a
predominantly Muslim population. Given the growing interest in the development of a
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
100
financial system, it is worth examining the contribution that financing makes to the
relationship between entrepreneurship and growth. Access to finance is increasing rapidly
worldwide due to the demand for financial products and services.
All of these different views provide sufficient reasons to think about the indirect and
mediating relationship that is the main goal of the current study. While previous research
has focused primarily on determining whether there is a relationship between a pair of
these three variables. As a result, the main concern of the current study is to fill the gap
and examine the relationship between these three variables by including indirect
relationships between entrepreneurship and economic growth. the effects of financial
development on entrepreneurship-growth nexus. In this context, the goal of our research
is to examine the mediating role of banking finance as a proxy for access to finance in
the relationship between the total early stage entrepreneurship (TEA) as a proxy for
entrepreneurship and economic growth (expressed as per capita (gross domestic product
GDP)) and to determine whether the contribution of entrepreneurship to economic
growth differs depending on access to finance of entrepreneurs in a country. Our
empirical analysis is based on the panel data covering the period 2013-2018 and 17
member countries of Organization of Islamic Cooperation (OIC) (Bahrain, Bangladesh,
Brunei, Egypt, Indonesia, Iran, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Qatar,
Saudi Arabia, Sudan, Turkey, and United Arab Emirates), which were selected based on
the availability of data relating in particular to entrepreneurship The study contributes to
the literature on entrepreneurship and economic growth in three ways. First, we offer
new insights on the mediating role of access to finance on entrepreneurship-growth
nexus. Second, to the best of our knowledge, no article has examined the relationship
between financial development, entrepreneurship and economic growth in OIC countries.
Third, this paper will equally contribute to the literature by incorporating up-to-date time
series data covering recent strategies for the main variables used. In this direction, this
paper tries to answer the following research question: whether the financing mediates
the relationship between entrepreneurship and economic growth in OIC countries?
The rest of the paper study was divided into five sections. Section two discusses
entrepreneurship literature and its relevance to finance and economic growth. While the
third presents the empirical method and data used; section four deals with research
methodology and the last section deals with the practical implications, conclusions and
limitations of this article.
2- Literature Review
2.1- Entrepreneurship and economic growth
Entrepreneurship is considered one of the basic motives for economic growth as it
increases the prosperity of the society that produces and goods more services and
creates new employment opportunities. For this reason, many countries have tried to
consolidate entrepreneurial activities and look for the factors that improve such activity
as it plays an active role in economic growth (Méndez-Picazo et al., 2012).
Entrepreneurship has aroused great interest in recent decades and is seen as an
important driver of economic development, inclusive society, well-being and a source of
innovation. There are two trends in business literature when assessing the impact of
entrepreneurship on economic development. One is based on horizontal innovation
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
101
growth models and an increasing product range (e.g. Romer, 1990). The other is based
on vertical innovation growth models and increasing quality (e.g. Schumpeter 1934;
Aghion & Howitt, 1992), which is mainly explained by Joseph Schumpeter's famous
argument of "creative destruction", according to which an entrepreneur says when a new
product or When a technological innovation is marketed, the less productive companies
are withdrawn from the market and a more competitive environment is created that leads
to higher productivity and economic growth (Schumpeter, 1934). Since then, Acs, et al.,
(2012)) completed the economic literature with the knowledge spillover theory of
entrepreneurship. The authors assume that economically relevant knowledge is most
important, with entrepreneurship playing the role of the link between knowledge,
commercialization, and economic growth. There are several theoretical explanations for
the relationship between economic growth and entrepreneurship (Baumol, 1990; Desai
et al., 2013). While Solow (1956) viewed physical and human capital as the drivers of
economic growth, Romer (1990) developed Solow's (1956) model by emphasizing the
importance of knowledge capital as an endogenous factor, with human capital and
technological innovations as the main drivers The main drivers are economic growth.
Romer (1990) further argued that new ideas and most research and development (R&D)
are produced by well-educated entrepreneurs who create and exploit new technological
advances and ultimately drive economic growth. Although Romers (1990) economic
growth model helped explain the different growth rates between countries, Acemoglu et
al. (2014) argued that if these institutions provide adequate incentives for entrepreneurs
to be more productive and ultimately contribute to economic growth, institutions could
play a central role in the production and organization of factors of production (i.e. physical
capital, human capital and technological innovations). Historically, Schumpeter (1934)
first introduced the important role of entrepreneurship in economic growth. He claimed
that innovative entrepreneurs were referred to as "agents of creative destruction". These
“agents” destroy the value of existing markets by creating new markets with new
products, services and technological innovations that offer higher returns than existing
companies. Unlike previous growth models, Schumpeter (1934) concluded that creative
destruction is the ultimate source of economic growth. Given economic growth and
development, it is best to focus on entrepreneurship that can lead to economic growth
(Acs, 2006).
2.2- Finance and economic growth:
Economic growth has been of focal interest in many macroeconomic papers and
researches. Thus, it is imperative that this topic is also addressed in light of access to
finance. The relationship between finance and growth begins with Bagehot's (1873)
articles on classic thinking and later with the work of Schumpeter (1912). On the other
hand, modern literature on economic growth often begins with research that led to Robert
Solow receiving a Nobel Prize in the mid-1950s. Nonetheless, the theoretical and
empirical literature of that time focused mainly on the role of capital and labor resources
and the use of technology as growth resources to secure economic growth.
The role of financial development is particularly important in allocating resources to their
most productive use. Moreover, the services provided by the financial sector can
contribute to economic growth by: (i) producing ex-ante information about investment
opportunities; (ii) improving ex-post monitoring of investment and exerting corporate
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
102
governance; (iii) facilitating risk management and diversification; (iv) mobilizing and
pooling savings; and (v) easing the exchange of goods and services (Levine, 2005).
In addition, Much evidence has pointed in the direction that financial development is a
driver for economic growth (see for instance Levine et al., 2000; Beck et al., 2000).
Furthermore, Levine (2002) claims that overall financial development is robustly linked
to economic growth regardless of it being bank-based or market-based. Lack of adequate
access to financing sources for entrepreneurs is considered as one of the main challenges
of starting a business. Because of the disadvantages of commercial banks and financial
institutions active in the field of financial services of the countries, financing and provision
of other financial services to micro, small and medium businesses is often costly. Existing
research on access to finance for entrepreneurs considers both the demand and supply
side factors affecting access to finance for entrepreneurs (Carter et al., 2003). Demand-
side arguments raise risk aversion as a factor in reducing the willingness of entrepreneurs
to use external financial resources (Mittal & Vyas, 2011). On the other hand, supply-side
argumentation discriminates financial institutions on the payment of entrepreneurship-
based financial resources (Carter & Shaw, 2006). Access to finance is also the most
widely recognized object of entrepreneurship policy, and non-entrepreneurs regularly cite
insufficient finance as a barrier to starting a business (Choo and Wong, 2006). Moreover,
the field of entrepreneurship, with seminal contributions from Williamson (2000), argues
that entrepreneurship play a key role in economic development. Recent studies on
economic growth show that entrepreneurs are a fundamental cause of economic growth,
shaping more proximate causes like the accumulation of physical and human capital (Hall
and Jones 1999; Acemoglu et al. 2014). The literature, however, largely separates
analyses of finance on relation between entrepreneurship and economic growth. Some
of authors investigate the links between finance, entrepreneurship and economic growth.
Thus, based on the above literature, we came up with the following hypotheses:
H1:“There is a positive association between finance and economic growth”
H2: “There is a positive association between finance and entrepreneurship”
H3:“finance mediates the relation between economic growth and entrepreneurship”
3- Development Challenges and the Role of Finance in OIC Countries
The financial system has an outstanding role in channeling funds to investments
efficiently
to support economic growth resulting in the decrease of income inequality, especially in
developing and underdeveloped nations such as the members of Organization of Islamic
Cooperation (OIC) countries. The financial system plays a prominent role in the efficient
channeling of funds for investments to support economic growth, which leads to a
reduction in income inequality, especially in developing and underdeveloped countries
such as the members of the countries of the Organization for Islamic Cooperation (OIC).
The key component in a financial system is banks. They act as an intermediary between
fund providers and those who need funds that contribute to economic growth. Banks also
play a role in the implementation of a country monetary policy. In this way, profitable
banks will ensure the continuity of economic growth and the stability of the financial
system.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
103
Based on OIC Economic Outlook (2019), the OIC countries are well endowed with
productive resources, especially human and natural resources. Efficient use of these
resources can lead to higher economic growth rates and human welfare. Ineffective use
of productive resources leads to lower growth rates and income levels. This is also due
to the fact that the OIC economies are mainly characterized by a high export
concentration and limited diversification of the domestic economy. Another important
consequence of inefficient use of productive resources is the lack of competitiveness. In
this context, the OIC member countries could not grow in the long term like the
industrialized countries in the last century. There are a number of tools that OIC countries
can use to meet development challenges and achieve higher growth rates. This includes
investing in human and institutional capacity, facilitating technological progress and
innovation, and channeling resources for productive investment through financial
development. An important element in the policy mix to increase productivity and
competitiveness is the need to maintain macroeconomic stability, as this would create a
business environment that is free from uncertainty and unexpected costs. In addition to
economic instability, political instability also has a major impact on growth paths in some
OIC countries where the negative impact of armed conflict goes well beyond the
measurable social and economic cost. The initiatives at the global level, regional
resolution mechanisms and efforts at the national level did not meet the growing needs
of developing countries to fund their development and enable them to complete
developing country status. UNCTAD estimates that total funding needs, including
investment needs, in developing countries alone range from $ 3.3 trillion to $ 4.5 trillion
a year. Some OIC countries are rich in resources where such resources have great
potential to promote development. From a financial perspective, Islamic funding in the
OIC countries offers a window of opportunity that could be used to fill the development
funding gap. The OIC countries have a long history of active collaboration within the OIC
in many areas, from trade and infrastructure development to capacity building and
investment. This facilitates the transfer of capital, know-how and expertise between OIC
member countries, which are crucial for development. This also enables several OIC
countries to benefit from each other's experiences and sources and at the same time to
advance their development paths. Finally, the OIC countries have unique tools and
mechanisms, including Islamic financial instruments, Zakat and Waqf funds, that have
the potential to make a significant positive contribution to financing development.
Overall, these factors would improve funding for development in the OIC countries by
helping to go beyond traditional understanding and benefit from unique solution
mechanisms.
4- Data and Methodology
4.1- Data
In the current study, entrepreneurship as the independent variable decided to take a
share of total early stage entrepreneurial activity (TEA). Entrepreneurship data was
taken from the Global Entrepreneurship Monitor database from 2013-2017. The paper
uses the domestic credit to private sector by banks as a proxy for Access to finance.
To have a balanced panel of data, we had limited the data used to years that are covered
in all data sets, and then we would have ended up the data consists of 17 countries
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
104
from all around the world and tracks information from 2013 until 2017. The dataset for
economic growth obtained from World Bank.
The GDP growth of OIC countries has slowed down to 3.1% in real terms in 2018, as
compared to 3.8% in 2017. Economic growth in OIC countries is expected to decline to
2.4% in 2019 and continue to remain below the world average. Only in 2020, OIC
countries are expected to grow above the world average. Lower income OIC countries
have been growing at a lower rate than the OIC average during 2014-2018, implying a
widening gap between rich and poor OIC countries. At the individual country level,
Libya, with a growth rate of 17.9% in 2018, was the fastest growing economy in the
group of OIC countries. In total, 26 OIC countries recorded a growth rate higher than
the world average of 3.6% in 2018 (OIC Economic Outlook, 2019).
The level of financial sector development in OIC countries remains shallow. The broad
money relative to the GDP of OIC countries was recorded at 60.1% in 2 much as 137%
in non-OIC developing countries and 124% of the world average. Domestic credit
provided by the financial sector in OIC countries was on average of the GDP whereas
this figure was 141.8% in non-OIC developing countries and On the other hand, access
to finance in OIC countries improved significantly o increased from 27.8% in 2011 to
46.3% in 2017. Financial depth in OIC countries remains shallow and needs to be
further improved. Without access to finance, it would be difficult to expect
entrepreneurial activities to flourish and contribute to economic development. Access
to finance in OIC countries remains among the most important constraints faced in
promoting entrepreneurial activity. Moreover, small firms consistently report higher
financing obstacles than medium and large companies, and they are also more
adversely affected in their operation and growth by these obstacles. Therefore,
innovative approaches are needed to solve the financing constraints of businesses for
them to invest in productive investment opportunities. More detailed discussions will be
made in the following chapters on the issue of mobilizing resources for financing
development (OIC Economic Outlook, 2019).
4.2- Model
Baron and Kenny's method of determining whether an independent variable influences a
dependent variable through a mediator is so well known that it is used by authors and
requested by reviewers almost reflexively. To determine that an independent variable X
influences distal dependent variable Y through a mediating variable M, as shown in Figure
1, Baron and Kenny (1986) recommend three tests.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
105
Figure 1: Diagram of a basic mediation model
A variable acts as a mediator if it meets the following conditions: (a) Variations in the
levels of the independent variables explain significant variations in the suspected
mediator (i.e., path a), (b) Variations in the mediator explain significant variations in the
dependent variable ( i.e., path b) and (c), when paths a and b are controlled, a previously
significant relationship between the independent and dependent variables is no longer
significant, with the strongest evidence of mediation occurring when path c is zero. Note
that condition c requires a significance test for the "direct" path c. Paths a, b and c are
tested and estimated by equations 1, 2 and 3:

(1)
 
(2)
 
(3)
Baron and Kenny then state: To test mediation, one should estimate the three following
regression equations: first, regressing the mediator on the independent variable; second,
regressing the dependent variable on the independent variable; and third, regressing the
dependent variable on both the independent variable and on the mediator. . . . To
establish mediation, the following conditions must be met: first, the independent variable
must affect the mediator in the first equation; second, it must be shown that the
independent variable influences the dependent variable in the second equation; and
third, the mediator must influence the dependent variable in the third equation. Baron
and Kenny go on to recommend the Sobel z-test for the indirect path    in figure 1,
as shown in equation (4):


(4)
Here a, b, and their squared standard errors come from equations 1 and 3, respectively.
We will contest three of these points. First, Baron and Kenny claim that mediation is
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
106
strongest when there is one indirect effect, but no direct effect in equation 3. But the
strength of mediation should be measured by the size of the indirect effect, not the
absence of the direct effect. The presence of the direct effect can inform theorizing about
other mediators. Second, there must be no significant "mediate effect" in Equation 2.
There should only be one requirement to establish mediation that the indirect effect  
is significant. Other Baron and Kenny tests are especially helpful in classifying the type
of mediation. Third, the Sobel test is in some cases extremely poor compared to a
bootstrap test popular by Preacher and Hayes (2004). In addition, a researcher expecting
a positive indirect effect    can overlook the fact that despite positive correlations
between X and Y, X and M, and Y and M, it can be significant and negative. Baron and
Kenny (1986) claimed that the evidence for Mediation is strongest, but when there is an
indirect effect, there is no direct effect that they call "full mediation". If there are both
indirect and direct effects, they call it "partial mediation". Although full mediation is the
gold standard, Iacobucci (2008) states "If all tests are done and reported properly, most
articles end with" partial mediation ". That is, mediation is usually accompanied by a
direct effect.
5- Results and Analysis
Multiple regression and mediation analysis were conducted to assess each component of
the proposed mediation model, using PROCESS Macro (Hayes, 2013) and SPSS 23.
In the first step, it was found that entrepreneurship was positively associated with
economic growth (total effect) (b = 23.2, t = 18.23, p < .001). In the second step, it
was found that finance was positively related to entrepreneurship (b = 10.34, t = 12.82,
p < .001). Lastly, in the third step results indicated that the increasing in finance was
positively associated with economic growth (b = 1.225, t = 4.32, p < .001).
Figure 2: Model of access to finance as a mediator
Entrepreneurship-economic growth
Table 2 and 3 illustrate that all the paths are statistically significant. Results of the
mediation analysis confirmed the mediating role of finance in the relation between access
to entrepreneurship and economic growth in OIC countries (b = 12.67; CI = 4.231 to
8.581).
In addition, results indicated that the direct effect of entrepreneurship on the economic
growth remained significant (b = 12.67, t = 5.36, p < .001) when controlling for finance,
thus suggesting partial mediation. In other words, financing only mediates part of the
effect of entrepreneurship on economic growth, that is, the intervention
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
107
(entrepreneurship) has some residual direct effect even after the mediator (finance) is
introduced into the model.
Table 2: Mediation effect of access to finance on economic growth through entrepreneurship
Effect
Path
Mean
SD
95% Lower
bound (BC)
95% Upper
bound (BC)
Indirect
effect
FIN ENT GDP→→
12.67
1.351
4.231
8.581
Note: SD: standard deviation; BC: Bias-Corrected
From the bootstrap percentile confidence interval shown in Table 2, the entire path is
95% of the bootstrap estimates, not including zero. This confidence interval leads to the
conclusion that the indirect effects of access to finance on entrepreneurship are
significantly different from zero.
Table 3: The direct effect, indirect effect and total effect
path
Direct
Indirect
Total
FIN ENT→
10.53
12.67
23.2
ENT GDP→
1.225
-
1.225
Table 4: Summary of Zero-Order Correlations, Semi-Partial Correlations & Squared Semi Partial
Correlation Coefficients
variable
2
R
Zero order
partial
Semi partial
(part)
*
Finance
0.489
0.598
0.259
0.262
0.146
Entrepreneurship
0.421
0.135
0.142
0.171
* Squared semi partial correlation
Table 4 shows the output for the zero order, partial and part (semi partial) correlation of
access to finance and economic growth controlling for entrepreneurship. The partial
correlation between access to finance and economic growth is 0.259, which is less than
the correlation when the effect of entrepreneurship is not controlled for (r = 0.598). In
terms of variance, the value of R
2
for the partial correlation is 0.13, which means that
entrepreneurship now shares only 13% of the variance in economic growth (compared
to 35.8% when finance was not controlled). Running this analysis has shown us that
entrepreneurship alone does explain some of the variation in economic growth. Semi
partial correlations (also called part correlations) indicate the “unique” contribution of an
independent variable. Specifically, the squared semi partial correlation for a variable tells
us how much R
2
will decrease if that variable is removed from the regression equation.
If we want to know what R
2
would be if access to finance were eliminated from the
equation, just compute
2
R
-
2
1
sr
= 0.489 - 0.146 = 0.343; and, if we want to know what
2
R
would be if entrepreneurship were eliminated from the equation, compute
2
R
-
2
2
sr
=
0.489 - 0.131 = 0.318.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
108
From the above results, we can concluded that access to finance has a positive effect on
entrepreneurship; which indicate that our first hypothesis confirm empirically. Moreover,
entrepreneurship tends to increase the level of economic growth; these results support
our second hypothesis. In addition, an examination of the specific indirect effect (see
table 1) indicates that access to finance is a mediator.
6- Conclusion
The main purpose of this research was to provide information about the mediating role
of finance in the relationship between entrepreneurship and growth. We find clear
evidence that entrepreneurship after controlling access to finance has a significant
positive impact on economic growth. The positive relationship between entrepreneurship
and economic growth is well known and documented. However, we show that
entrepreneurship also has indirect positive effects on economic growth by improving
access to finance and not just having a direct impact. The mediation of finance between
entrepreneurship and economic growth shows that better access to finance would lead
to an improvement in economic growth. These results show that the overall relationship
between entrepreneurship and economic growth is not only direct, but also that
entrepreneurs' access to finance contributes to economic growth. As a result, higher-
level OIC countries tended to experience higher-level entrepreneurship, which in turn
contributed to increased economic growth. In addition, the results showed that there is
a positive correlation between the increase in business activities and economic growth.
The current study extends the literature on economic growth by taking into account the
mediating effect of finance between entrepreneurship and economic growth. Evidence of
the indirect impact of funding on the relationship between entrepreneurship and
economic growth shows that access to finance makes a significant contribution to
promoting economic growth. In addition, the results of current and previous research
suggest that to stimulate and improve economic growth, OIC countries should create an
environment that can improve access to finance and, consequently, promote economic
growth. In financial terms, access to finance in the OIC countries provides a window of
opportunity that could be used to fill the development funding gap. Islamic finance,
including Zakat, is estimated to be around $ 2 trillion in 2015, which is expected to
increase to $ 3 trillion by 2020. For example, the provision of Zakat grants by formal
institutions can ensure that more people are reached and the neediest are reached and
could therefore contribute to the achievement of sustainable development. Many OIC
countries need to make more efforts to achieve sustainable development, for which more
financial resources have to be devoted to their development.
References
Acemoglu, D. Francisco, A.J.A, Robinson. (2014). Institutions, Human Capital, and
Development. Annual Review of Economics 6, no. 1: 875–912.
Acs, Z. J., Audretsch, D. B., Braunerhjelm, P., & Carlsson, B. (2012). Growth and
entrepreneurship. Small Business Economics, 39(2), 289-300.
Acs. (2006). How Is Entrepreneurship Good for Economic Growth? Innovations:
Technology, Governance, Globalization. Volume 1, Issue 1, Pages 97-107.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
109
Aghion, P., & Howitt, P. (1992). A model of growth through creative
destruction. Econometrica, 51.
Allen, F., Qian, J., & Qian, M. (2005). Law, finance, and economic growth in
China. Journal of financial economics, 77(1), 57-116.
Audretsch, D. B., Keilbach, M. C., & Lehmann, E. E. (2006). Entrepreneurship and
economic growth. Oxford University Press.
Bagehot, W. (1873). Lombard street. King.
Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in
social psychological research: Conceptual, strategic, and statistical
considerations. Journal of personality and social psychology, 51(6), 1173.
Baumol, W. J. (1990). Entrepreneurship: Productive, unproductive, and
destructive. Journal of Business Venturing, 11(1), 3-22.
Baumol, W. J., & Strom, R. J. (2007). Entrepreneurship and economic growth. Strategic
entrepreneurship journal, 1(34), 233-237.
Beck, T., Levine, R., & Loayza, N. (2000). Finance and the Sources of Growth. Journal of
financial economics, 58(1-2), 261-300.
Carree, M. A., & Thurik, A. R. (2010). The impact of entrepreneurship on economic
growth. In Handbook of entrepreneurship research (pp. 557-594). Springer, New York,
NY.
Carree, M., Van Stel, A., Thurik, R., & Wennekers, S. (2007). The relationship between
economic development and business ownership revisited. Entrepreneurship & regional
development, 19(3), 281-291.
Carter, N., Brush, C., Greene, P., Gatewood, E., & Hart, M. (2003). Women entrepreneurs
who break through to equity financing: the influence of human, social and financial
capital. Venture Capital: an international journal of entrepreneurial finance, 5(1), 1-28.
Carter, S., & E. Shaw. (2006). Women’s business ownership: recent research and policy
developments. Small Business Service Research Report, London: DTI.
Choo, S., & Wong, M. (2006). Entrepreneurial intention: triggers and barriers to new
venture creations in Singapore. Singapore management review, 28(2), 47-64.
Cumming, D., Johan, S., & Zhang, M. (2014). The economic impact of entrepreneurship:
Comparing international datasets. Corporate Governance: An International
Review, 22(2), 162-178.
Desai, S., Acs, Z. J., & Weitzel, U. (2013). A model of destructive entrepreneurship:
Insight for conflict and postconflict recovery. Journal of Conflict Resolution, 57(1), 20-
40.
Goel, R. K. (2018). Foreign direct investment and entrepreneurship: gender differences
across international economic freedom and taxation. Small Business Economics, 50(4),
887-897.
Hall, R. E., & Jones, C. I. (1999). Why do some countries produce so much more output
per worker than others?. The quarterly journal of economics, 114(1), 83-116.
Iacobucci, D. (2008). Mediation Analysis (Vol. 156). SAGE Publications.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
110
Kreft, S. F., & Sobel, R. S. (2005). Public policy, entrepreneurship, and economic
freedom. Cato J., 25, 595.
Law, S. H., & Singh, N. (2014). Does too much finance harm economic growth?. Journal
of Banking & Finance, 41, 36-44.
Levine, R. (2002). Bank-based or market-based financial systems: which is
better?. Journal of financial intermediation, 11(4), 398-428.
Levine, R., Loayza, N., & Beck, T. (2000). Financial intermediation and growth: Causality
and causes. Journal of monetary Economics, 46(1), 31-77.
Lippmann, S., Davis, A., & Aldrich, H. E. (2005). Entrepreneurship and
inequality. Research in the Sociology of Work, 15, 3-31.
Martin, B. C., McNally, J. J., & Kay, M. J. (2013). Examining the formation of human
capital in entrepreneurship: A meta-analysis of entrepreneurship education
outcomes. Journal of business venturing, 28(2), 211-224.
Marvel, M. R., Davis, J. L., & Sproul, C. R. (2016). Human capital and entrepreneurship
research: A critical review and future directions. Entrepreneurship Theory and
Practice, 40(3), 599-626.
Méndez-Picazo, M. T., Galindo-Martín, M. Á., & Ribeiro-Soriano, D. (2012). Governance,
entrepreneurship and economic growth. Entrepreneurship & Regional
Development, 24(9-10), 865-877.
Mittal, M., & Vyas, R. K. (2011). A study of psychological reasons for gender differences
in preferences for risk and investment decision making. IUP Journal of Behavioral
Finance, 8(3).
Nyström, K. (2008). The institutions of economic freedom and entrepreneurship:
evidence from panel data. Public choice, 136(3-4), 269-282.
OIC Economic Outlook (2019), accessed from
https://www.sesric.org/files/article/696.pdf
Packard, M. D., & Bylund, P. L. (2018). On the relationship between inequality and
entrepreneurship. Strategic Entrepreneurship Journal, 12(1), 3-22.
Parker, S. C. (2018). The economics of entrepreneurship. Cambridge University Press.
Preacher, K. J., & Hayes, A. F. (2004). SPSS and SAS procedures for estimating indirect
effects in simple mediation models. Behavior research methods, instruments, &
computers, 36(4), 717-731.
Romer, P. (1990). Are nonconvexities important for understanding growth? National
bureau of economic research, 1050 Massachusetts Avenue Cambridge, MA 02138.
Working Paper No. 3271.
Schumpeter J. A. (1934). The theory of economic development. Cambridge, MA: Harvard
University Press.
Schumpeter, J. A. (1912). 1934. The theory of economic development.
Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly
journal of economics, 70(1), 65-94.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.98-111
Entrepreneurship and economic growth: the mediation role of access to finance
Mohsen Mohammadi Khyareh
111
Valliere, D., & Peterson, R. (2009). Entrepreneurship and economic growth: Evidence
from emerging and developed countries. Entrepreneurship & Regional
Development, 21(5-6), 459-480.
Wennekers, S., & Thurik, R. (1999). Linking entrepreneurship and economic
growth. Small business economics, 13(1), 27-56.
Williams, E. E., & Thompson, J. R. (1998). Entrepreneurship and productivity. University
Press of America.
Williamson, O. E. (2000). The new institutional economics: taking stock, looking
ahead. Journal of economic literature, 38(3), 595-613.
Wong, P. K., Ho, Y. P., & Autio, E. (2005). Entrepreneurship, innovation and economic
growth: Evidence from GEM data. Small business economics, 24(3), 335-350.
OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp. 112-119
NOTES
MARITIME PIRACY IN THE GULF OF GUINEA
Henrique Portela Guedes
maildoportela@gmail.com
Portuguese Navy Captain (Portugal), graduated in Naval Military Sciences, by Escola Naval,
postgraduate in International Humanitarian Law and Human Rights in conflict situations, by
Instituto Europeu/IDN, and in Advanced Geopolitics Studies, for Universidade Autónoma de
Lisboa/IDN. He is currently an Advisor and researcher in the Instituto da Defesa Nacional (IDN).
He has a vast set of articles published on Maritime Piracy in Portugal, Spain, Brazil and the
United Kingdom, is the author of the book ‘The World of Maritime Piracy: the last two decades’
and co-author of two sub-chapters in the book 'Safety at Sea: A holistic view'.
Maritime piracy dates back to the beginnings of maritime navigation, when the first
commercial exchanges by sea began, having been considered practically extinct in the
19th century.
It began to increase gradually from the end of the 1980s, however, the world only woke
up to this reality with the outbreak of maritime piracy in the waters of Somalia in 2008.
Since then, to this day, this phenomenon has become a serious threat to global maritime
security.
Currently, the Gulf of Guinea (GG) is the major concern of the international community,
due to the high number of acts of piracy that have been registered there.
This growth is due to several factors, mostly common to practically all the countries that
are part of this Gulf, such as: deficient social policies, high corruption, high demography,
high unemployment rates and huge proliferation of criminal networks. These are the
factors that, associated with the lack of maritime policies on the part of the States in the
region and of naval means to ensure the surveillance of their waters, have caused this
area to register an increasing number of pirate attacks and, consequently, be considered
as one of the most dangerous in the world for maritime navigation.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
113
1. Causes, concerns and mitigation actions
There are several locations worldwide that are considered hotspots for maritime piracy
1
and Armed Robbery Against Ships (ARAS)
2
, that is, places that due to different factors
have become prone to this type of acts. These locations, situated close to major sea
routes, are usually associated with the existence of states with weak or failed
governments, where social policies are deficient or non-existent, unemployment rates
are very high, poverty levels are extremely high and have a high demographic density,
mostly young people. Many of these factors are present, to a greater or lesser extent, in
the countries of the GG, which has contributed a lot to the increase in maritime piracy /
ARAS in the region, namely in the waters of Nigeria.
The GG region is located
3
between Côte d'Ivoire and Gabon, and includes, in addition to
these countries, Ghana, Togo, Benin, Nigeria, Cameroon, Equatorial Guinea and São
Tomé and Príncipe. Geographically, it contains the crossing of the Equator line with the
Greenwich meridian.
This Gulf has become, in recent decades, a place of excellence for commercial navigation.
This role is closely associated with the huge hydrocarbon deposits in this area and the
geographical location of the region (proximity to Europe and the USA).
Despite all this prosperity, this Gulf is currently one of the most dangerous maritime
areas in the world, due to the great regional insecurity that is felt there. If this is not
overcome in the near future, it could endanger the entire global economic strategy for
this region of the globe, especially the one related to the trade of "black gold" and natural
gas from Nigeria.
The existence of an increasing number of criminal networks on land, associated with the
lack of maritime policies on the part of the states in the region, has led some of these to
engage in maritime piracy / ARAS. These rebel groups, mostly from Nigeria, started their
activity on the Nigerian coast, however, they gradually extended their area of activity to
the waters of Benin, Togo, Ghana, Cameroon, Equatorial Guinea and São Tomé and
Príncipe. The increase in maritime piracy / ARAS in this part of Africa is currently a major
concern for the international community, because the states in the region are unable to
guarantee maritime safety in their waters. The apprehension about this insecurity at sea
is denoted even by the African countries themselves, as these attacks are becoming a
serious problem for maritime transport, which has been causing a slight decrease in trade
in the region and, consequently, a reduction in port revenues, due to the fact that there
are fewer ships practicing them.
In recent years, the states of this Gulf have started to develop some maritime policies,
because in the last decades their attention has almost always been focused on the control
of their territories on the continent, therefore they have not devoted much attention to
1
Illicit acts of violence and / or detention and / or pillaging committed, for private purposes, by the crew and
/ or passengers of a private ship, and directed against a ship and / or people and / or goods on board it,
committed beyond 12 nautical miles (territorial sea).
2
Illicit acts identical to those of piracy, only committed in the territorial sea or in inland waters. The territorial
sea consists of a maritime area, under national sovereignty, that goes up to 12 nautical miles, counted from
the “coast line” (straight or normal base line) of a State. One nautical mile is 1852 meters.
3
According to the International Hydrographic Organization. This Gulf is sometimes considered to extend
from Senegal to Angola, that is, it is located between the parallels 15⁰0’0’’N and 15⁰0’0’’S.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
114
their sea. As a result, their naval forces are poorly equipped, poorly trained and
underfunded to be able to secure state authority at sea in their waters.
The increase in maritime piracy / ARAS in the GG has led the UN to monitor this situation
regularly, and with great concern. Proof of this is the approval by its Security Council of
two Resolutions related to this theme, Resolution 2018 (2011), of October 31, and
Resolution 2039 (2012), of February 29. These included the need for concerted action by
countries in the region to deal with maritime piracy / ARAS, through the development of
a comprehensive and structured regional strategy, which includes the exchange of
information and the development of operational coordination mechanisms.
The various subregional organizations have since been very available to help combat the
various types of illegal activities in the region. The Economic Community of Central
African States
4
(ECCAS) has collaborated with the states of this Gulf in implementing a
maritime security strategy, which includes support for their navies and assistance in
organizing joint exercises in order to fight the insecurity in the GG region.
On the other hand, the Economic Community of West African States
5
(ECOWAS) has also
been interested in collaborating. Good cooperation between ECCAS and ECOWAS could
allow for joint maritime patrol actions, as well as the right of persecution across maritime
borders. The Gulf of Guinea Commission
6
(GGC) has also remained active in recent years
and it is from all these African organizations the one which mandate gives it special
openness to be able to deal specifically with maritime issues.
All the collaboration policies that have been adopted in Africa on maritime security are
still in an embryonic phase and, if they are not closely monitored by a continuous
presence at sea, they will be mere symbolic actions. Some of the Western powers with
interests in the region have shown themselves to be available to support these initiatives
both financially and with the exchange of knowledge in the area of security. In recent
years, countries such as the USA, France and Portugal, among others, have been very
attentive to the region's problems and, through cooperation programs, have participated
with their ships in joint exercises with the GG navies. The main objective of these is to
increase the capacity of these navies to respond to maritime piracy / ARAS or any other
type of maritime crime, through the improvement of interoperability of communications,
information sharing and training actions within the scope of operational activities related
to maritime safety.
Among the various multinational exercises / activities
7
that take place regularly in West
Africa, the OBANGAME EXPRESS exercise, held annually since 2011, inclusive, is the one
with the largest number of participating countries / organizations and is sponsored by
the USA, through the U.S. Africa Command. In March 2019, it held its 9th edition, which
brought together forces from Africa, Europe and South and North America, in a total of
4
It consists of ten member countries: Burundi, Cameroon, the Central African Republic, Chad, Congo,
Equatorial Guinea, Gabon, São Tomé and Príncipe, the Democratic Republic of Congo and Angola.
5
The fifteen member countries are: Benin, Burkina Faso, Cape Verde, Côte d'Ivoire, Gambia, Ghana, Guinea,
Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.
6
It consists of eight countries: Angola, Cameroon, Democratic Republic of Congo, Congo, Gabon, Equatorial
Guinea, Nigeria and São Tomé and Príncipe.
7
The CORYMBE operation, which has been carried out by France, almost continuously, since 1990, the GRAND
AFRICAN NEMO exercise, also led by France, and the OPEN SEA initiative carried out by Portugal.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
115
31 countries
8
, of which 20 are Africans, with the collaboration of several regional and
international organizations, such as ECCAS and ECOWAS, among others.
Despite all these initiatives to fight maritime crime, there are serious doubts regarding
its effectiveness and sustainability, because the means will always be few and the
criminals will quickly move from the most patrolled areas to the least guarded areas. It
is easily anticipated that if there is no involvement of international institutions, with a
view to a global maritime security strategy for the region, it is unlikely with single
measures that this arduous task of combating maritime piracy / ARAS in GG will be
successful.
2. Nigerian pirates: the protagonists of insecurity
Nigeria, despite being the country with the largest economy in the region and having the
largest armed forces in the GG, is considered by neighboring countries as the focus of
this Gulf's problems, much due to the fact that it is unable to stabilize its region of the
Niger River Delta
9
, densely populated area and from which it derives most of the oil
exploited on land. The Nigerian economy is still being held hostage by the oil industry,
which has not only brought benefits to the country, because it has also contributed
significantly to end most of the traditional means of subsistence in that Delta, such as
agriculture and fishing. Pollution caused by oil exploration has been gradually
contaminating the land due to the deposit of a large amount of hazardous waste, which
has led to the abandonment of many agricultural lands, thus increasing even more the
subsistence difficulties on the part of the population. The latter is also no longer able to
rely on fishing in a large part of its lakes and rivers, as pollution has caused a lack of
oxygen in the waters and, consequently, a decrease in the number of fish and an increase
in water-borne diseases.
On the other hand, the rapid demographic growth that has been felt in Nigeria, where
about 62.3%
10
of the population, in other words, 126 679 957 of Nigerians, less than 25
years old, have undoubtedly been instrumental in justifying the number of young
Nigerians who have been associated with maritime piracy / ARAS.
If the situation on the ground is unstable, either in Nigeria or in practically all other GG
States, at sea, illicit activity in general and maritime piracy / ARAS in particular have
plagued the region a lot in recent years. In the period between 2000 and 2018, inclusive,
according to IMB records
11
, an average of 38 acts of maritime piracy / ARAS per year
occurred in this Gulf, with the waters of Nigeria being considered the most dangerous,
with an average of 25 acts per year, in the same period of time.
8
Angola, Belgium, Benin, Brazil, Cape Verde, Cameroon, Canada, Ivory Coast, Democratic Republic of Congo,
Denmark, France, Gabon, Gambia, Germany, Ghana, Guinea, Guinea-Bissau, Equatorial Guinea, Liberia,
Morocco, Namibia , Netherlands, Nigeria, Portugal, Republic of Congo, São Tomé and Príncipe, Senegal,
Sierra Leone, Spain, Togo, Turkey and the United States.
9
Includes the states of Cross River, Akwa Ibom, Rivers, Bayelsa, Delta and Edo.
10
The World Factbook.
11
IMB – International Maritime Bureau.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
116
Figure 1 - Maritime piracy / ARAS acts in the GG between 2000 and 2018
In 2018 alone, there were 72 acts of maritime piracy / ARAS in this Gulf, of which 48 in
Nigeria, which makes this year the worst ever in terms of this phenomenon in the last
28 years
12
, either in this Gulf or in Nigeria.
Figure 2 - Acts of maritime piracy / ARAS at GG in 2018
The previous highs had been 54 acts in 2008 and 42 acts in 2007, respectively in GG and
Nigeria. It is said that, in the case of Nigeria, the number of reported acts may not even
reach 50% of those that have actually occurred.
Despite the figures showing the contrary, since 2015 there has been an improvement in
patrolling by the Nigerian Navy, which, together with the lowering of crude prices, has
12
IMB registers the number of acts of maritime piracy / ARAS worldwide since 1991.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
117
caused the pirates' Modus Operandi to change. Right now, there are practically no
hijackings of ships for theft of crude (Bunkering) and subsequent sale on the black
market, which had been a common practice in recent years. An act of Bunkering can take
one or more days to consummate, with the strong possibility that the pirates are
discovered and arrested by the authorities. On the other hand, the number of attacks
with the purpose of kidnapping crew members of the ships has been increasing, with a
view to obtaining high amounts for their rescue. This is the current Modus Operandi of
the pirates. Their dexterity is already such that they are able to consummate their acts
in relatively short periods of time, sometimes around 30 minutes, which allows them to
have a very high success rate in their actions. Due to the fact that the activity of pirates
in this Gulf is now very much directed towards the kidnapping of seafarers, to obtain
ransoms, the number of kidnapped crew members has been increasing significantly in
recent times, and the situation is expected to worsen in the near future.
3. Conclusions
Although the GG region is very rich in natural resources, the impoverishment of
populations, corruption, anarchy and social dislocation are common to virtually all
countries in this Gulf. These are the factors that, associated with the great proliferation
of illegal weapons and the proximity of major trade routes, have encouraged the
resurgence of maritime piracy / ARAS in the region.
In Nigeria, the country where most of the pirates working in the GG come from, the inter-
ethnic tensions caused by the social instability that exists in that country, have generated
a lot of violence between armed groups and between them and the government,
especially in the various states of the Niger River Delta. Some of these groups started to
dedicate themselves to maritime piracy / ARAS as a way to get “easy” money, because
they see this activity as profitable and not very dangerous, which allows them not only
to finance their activities, but sometimes their livelihood and that of their families.
Since sea piracy / ARAS can never be eradicated from the seas, government efforts
should be made to minimize it, therefore, it is necessary for the GG countries to adopt
social development measures that provide better living conditions, job creation and
promote literacy and social justice. In the particular case of Nigeria, the large amounts
obtained from the sale of oil should first be used in the areas from which it is extracted,
giving more well-being to local populations.
The fight against maritime piracy / ARAS in GG, to be more effective, must involve
everyone, which will only be achieved with greater awareness of the importance of
maritime security, either by governments or local populations. The national, regional and
global interests of the countries are increasingly passing through the sea - in areas such
as trade, maritime transport, fishing, tourism and the exploitation of marine resources,
among many other activities -, whose success will only be possible with maritime piracy
/ ARAS reduced to a minimum, since it will never be possible to eradicate it once and for
all.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
118
References
1. Books
Guedes, Henrique, 2014. The World of Maritime Piracy: the last two decades. 1st Ed.
Lisbon: Edições Revista de Marinha. ISBN 978-972-96535-4-4.
Payne, John C., 2010. Piracy Today – Fighting Villainy on the High Seas. 1st Ed. New
York – USA: Sheridan House Inc. ISBN 978-1-57409-291-2.
Lehr, Peter, 2007. Violence at Sea: Piracy in the age of global terrorism. 1st Ed. New
York – USA: Taylor & Francis Group, LLC. ISBN 0-415-95320-0.
2. Repports
International Maritime Bureau, 2019. Piracy and Armed Robbery Against Ships, Annual
Report 2018, United Kingdom: ICC
The Economist. Democracy Index 2018: Me too?, The Economist Intelligence Unit Limited
2019
United Nations Development Programme (UNDP). Human Development Indices and
Indicators: 2018 Statistical Update, 1 UN Plaza, New York, NY 10017 USA
3. Online electronic sources
International Maritime Bureau. Available at: http://www.icc-ccs.org [Accessed March 15,
2019].
RINKEL, Serge - Piracy and Maritime Crime in the Gulf of Guinea: Experience-based
Analyses of the Situation and Policy Recommendations. Available at:
https://www.ispk.uni-kiel.de/de/publikationen/arbeitspapiere/serge-rinkel-piracy-and-
maritime-crime-in-the-gulf-of-guinea-experience-based-analyses-of-the-situation-and-
policy-recommendations [Accessed on March 10, 2019].
The World Factbook. Disponível em: https://www.cia.gov/library/publications/the-world-
factbook/geos/ni.html [Accessed on March 5, 2019].
Transparency International. Disponível em: www.transparency.org [Accessed on March
5, 2019].
4. Conventions
United Nations Convention on the Law of the Sea (UNCLOS), December 10, 1982.
5. UNSC Resolutions
United Nations Security Council Resolution No. 2018 (2011), adopted at its meeting No.
6645, of 31 October 2011.
United Nations Security Council Resolution No. 2039 (2012), adopted at its meeting No.
6727, of 29 February 2012.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
Vol. 11, Nº. 1 (May-October 2020), pp.112-119
Maritime piracy in the Gulf of Guinea
Henrique Portela Guedes
119
How to cite this note
Guedes, Henrique Portela (2020). "Maritime piracy in the Gulf of Guinea". JANUS.NET e-
journal of International Relations, Vol. 11, N.º 1, May-October 2020. Consulted [online] on
the date of the last visit, https://doi.org/10.26619/1647-7251.11.1.01